Thursday, June 22, 2017

GNC Holdings: An Obsolete Business Model Facing Industry Headwinds


  • Hoping to reverse the declining trend in same-store sales growth, GNC is ramping up sales/marketing campaigns. Insiders also increased share purchases as tokens of confidence.
  • Despite valiant turnaround efforts, the traditional bricks-and-mortar business model for the wellness products is becoming obsolete due to changing industry fundamentals.
  • Increasing competition from MLM and e-commerce operators significantly strain GNC's chances of a turnaround. Financial metrics also indicate undue risks for prudent investment.

Headquartered in Pittsburgh, Penn., GNC Holdings (NYSE:GNC) -- the leading global retailer of wellness products and nutrition -- is illustrative of a growth company that previously delivered stellar earnings, yet is now transitioned into a declining phase. Consequently, the share price has been trending down to match its degrading intrinsic value. Accordingly, the stock traded more than 70% lower in the past year. Despite exhaustive efforts by stellar management, the supplement business is undergoing a fundamental shift, thus hampering any chances of a successful turnaround.

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