GNC may be headed to bankruptcy

Battered by the coronavirus-shutdowns of its stores that pushed net losses to $200 million in the first three months of the year, Pittsburgh-based GNC Holdings Inc. may file for bankruptcy protection if it can not convince lenders to delay payments due May 16 on $50 million in debt, company officials said

The health and wellness products retailer will consider “all options” as it negotiates with its lenders this week and can’t predict if the talks will result in extending the deadline for payments, Ken Martindale, chief executive officer told analysts in a conference call Monday.

Filing for protection from creditors under Chapter 11 of the bankruptcy code is one option if GNC can’t reach a settlement with those creditors, Tricia Tolivar, GNC chief financial officer, told analysts in the same call about GNC’s financial status after the quarter ending March 31.

GNC’s bottom line suffered from the closing of about 1,100, or 30%, of its United States and Canada company-owned and franchise retail stores because of covid-19 restrictions, Martindale said.

The firm, founded in 1935 on Wood Street in Downtown Pittsburgh, is just the latest of the brick-and-mortar retailers to teeter on the edge of bankruptcy shortly before and during the pandemic, which exacerbated existing problems in the fight against online sales.

JCPenney Co., an iconic retailer that is an anchor in many malls, is considering bankruptcy as it is burdened with $4 billion in debt. Pier One, with stores in Western Pennsylvania, filed for bankruptcy in February, and Art Van Furniture, buyer of Levin Furniture that was founded in Mt. Pleasant, filed for bankruptcy in early March, before the covid-19 shutdowns.

“It’s hard to say if GNC will file for bankruptcy, at a time when everyone’s business model is so challenging. I think the level of uncertainty is going to make it difficult to make meaningful projections” on a company’s future, said Jack Teitz, a managing partner in Compass Advisory Partners, which is involved in day-to-day management and financial oversight of companies, as well as debt restructuring.

If GNC’s lenders have secured equity through their loans, Teitz said they may believe they would be better off with GNC filing for bankruptcy. With a bankruptcy filing, the lenders might get the company’s assets in return for the stake it has in the company, Teitz said.

To cut costs during this pandemic, GNC has furloughed 3,800 workers, even though about 100 stores have reopened, Martindale said. Staff at the company’s headquarters have been hit as well, with about 200 employees laid off through the end of May, Martindale said.

Even if GNC survives, Martindale promised GNC would close a “significant number” of more stores than announced last year. GNC said in July 2019 it intended to close about 900 stores, with the target on mall stores. The company’s footprint in malls might drop from 800 stores to about 400 to 500 stores, Tolivar said at the time.

The bad financial news pushed GNC stock even lower, closing Wednedsay on the New York Stock Exchange at a mere 42 cents a share, after opening at 46 cents. The stock price has plunged from its 52-week high of $3.42 a share.

Matthew Milanovich, GNC vice president for investor relations, did not respond to a request for a comment.