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GNC revenue, sales drop, but vitamin retailer says plan in place

| Tuesday, July 29, 2014, 10:36 p.m.

GNC Holdings Inc. will try to wean shoppers off discounts and simplify pricing to combat declining sales, CEO Joe Fortunato said on Tuesday after the company reported a drop in revenue and falling same-store sales.

The Downtown-based vitamin and supplement retailer will begin implementing changes at its stores later this year aimed at reducing reliance on promotions, buy-one-get-one deals and other price reductions, Fortunato said.

“We are not getting credit from the consumer no matter how much we escalate discounting,” he told analysts during a conference call.

“What we let go further and further over time was the amount of discounting and the look and feel of our stores. It just looks like we're a Kmart on sale,” he said.

Kurt Frederick, an analyst with Los Angeles investment firm Wedbush, called the planned moves “positive steps” for a company that is struggling with a pricing strategy that is confusing to customers.

“I think it addresses some of the issues that they've been having,” he said. “I think that's why the stock came back to life after an initial drop.”

GNC closed up 19 cents, or 0.5 percent, to $32.75 after opening the trading day down more than 1 percent. The company's stock is down 46 percent from its 52-week high of $60.98.

For the April-June quarter, GNC reported a 4 percent decline in same-store sales, a lowered prediction for full-year profit and quarterly net income that missed analyst expectations. Same-store sales are a key guage of a retailer's health because it excludes revenue from newly opened stores.

GNC dropped its estimate for full-year net income to $2.85 a share — which would equal 2013 net income. In May, the company had predicted full-year earnings of $3.05 to $3.10 a share.

Frederick said the updated outlook “looks achievable” for this year. He expects improvements to be realized in 2015.

Net income was $69.9 million in the April-June quarter, down 2.5 percent from $71.7 million a year earlier. On a per-share basis, GNC boosted net income to 77 cents, up from 73 cents, through share repurchases that allocated the profit among a smaller portion of outstanding stock.

Analysts on average expected net income of about 80 cents a share, according to data from Bloomberg.

Revenue was down to $675.2 million in the quarter, from $676.3 million a year earlier.

“We are taking the necessary steps to ensure the long-term growth and evolution of the GNC brand,” Fortunato said.

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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