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Can GNC Holdings Turn Around?

Today shares of GNC have hiked as much as 31.5% to highs of $3.80!  After volume has been relatively low and shares have been trading flat since February this year, shares of GNC are finally moving again.  Could this be the turn-around investors are waiting for?

GNC Holdings, Inc. (NYSE:GNC) is a global retailer of health and wellness products such as herbal supplements and vitamins.  The company has been around since 1935 and has roughly 6,600 locations world-wide both corporate and franchise owned.  GNC’s retail locations have been a house-hold name in the nutritional supplement industry for decades.

Unfortunately, like most of the retailers we’ve grown to love, GNC has felt the wrath of online competition in recent years.  Companies like Amazon have posed a serious threat to their way of business, providing an easier means of buying nutritional supplements.

GNC has made a few critical changes to compete with the online competition by partnering up with another large nutritional supplement company.

The US Committee of Foreign Investment recently approved GNC’s largest investment of $300 million from Harbin Pharmaceutical Group Holding’s, better known as Hayao.  The agreement gives Harbin Pharmaceutical $300 million in convertible preferred shares, convertible to common stock at $5.35 a share.  Once converted, Harbin Pharmaceutical will effectively own 40% of GNC’s common stock.

GNC plans to use this money to pay outstanding debt and for other corporate tasks.  The company has recently been beat up by the rise of online competition which has led to weak sales figures and even fears of a potential bankruptcy.  By paying off outstanding debt, the company positions itself much better to take on the online competition.

GNC has also made moves into international markets such as China through their joint venture agreement with Harbin Pharmaceuticals.  Harbin Pharmaceuticals is already well established in China in the distribution, regulation, and manufacturing of nutritional supplements.  The partnership plans to utilize the best of both companies to expand into the Chinese market and further capitalize.

Zachs Investment Research’s algorithm predicts GNC’s next earnings report to be on 10/25/2018.  In their last report, they beat consensus EPS estimated by over 40%.

 

 

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