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GNC posts lower profit in 1Q

| Tuesday, May 6, 2014, 4:36 p.m.

GNC Holdings Inc. is feeling the pressure from shrinking consumer demand for multivitamins and pre-workout supplements.

The Downtown-based vitamin and nutrition supplement retailer posted a drop in first-quarter profit on Tuesday and cut its full-year forecast because it expects continued softness in same-store sales, which reflect the performance of stores open at least a year.

Same-store sales are a key measure of a retailer's performance because it shows how much of the revenue growth comes from improved management rather than from newly opened stores.

In the January-March quarter, GNC reported sales at stores open at least a year fell by 0.7 percent compared to the same quarter last year. But revenue rose to $677.3 million, up from $664.7 million, as the company opened new stores.

Severe winter weather hampered sales in January and February, but the company is being hurt by industrywide consumer trends.

“The good news is that I do not view these factors as damaging to our long-term growth model. However, what I do anticipate is that in the short term the industry will react … with more aggressive promotional efforts,” CEO Joseph Fortunato told analysts during a conference call.

To counter the issues, Fortunato said GNC will step up promotions, continue to aggressively market its Gold Card customer-loyalty program and try to draw in new customers with its latest advertising campaign, dubbed “Beat Average.”

Net income fell to $69.9 million in the quarter, down from $72.6 million a year earlier. But on a per-share basis, net income rose to 75 cents, up from 73 cents. Per-share profit rose because the company decreased its number of outstanding shares through buybacks, which Fortunato said could increase throughout this year.

Analysts had expected net income of 76.8 cents a share, according to Bloomberg.

GNC reduced an announced estimate for 2014 profit because of the weakness in sales. It now expects to earn $3.05 to $3.10 a share this year, down from $3.18 to $3.24.

In after-hours trading, GNC plummeted to $39 a share, down $4.65 or 10.7 percent.

The “Beat Average” campaign debuted late last month and will feature a range of advertising on television, in print and online and through direct marketing.

Fortunato said GNC advertising will feature prominently during ESPN network coverage of the National Football League draft and World Cup tournament.

Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or anixon@tribweb.com.

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