What's In Store for GNC Holdings This Earnings Season?

GNC Holdings, Inc. GNC is scheduled to report first-quarter 2018 results on Apr 26, before the opening bell.

Last quarter, the company posted a negative earnings surprise of 3%. Also, GNC Holdings' trailing four-quarter average earnings miss is 16.5%.

Factors at Play

GNC Holdings' last reported quarter's revenues dropped 2.1% year over year. Apart from sluggishness at the U.S. & Canada segments, declining revenues at the Manufacturing/Wholesale segment led to this downside. In the absence of any growth catalyst, we expect a similar trend in the first quarter of 2018 as well.

Moreover, GNC Holdings has a number of competitors in the market that include large international pharmacy chains, supermarket firms and big U.S.-based companies with global operations. Thus, we anticipate the company to slash product prices in the face of stiff competition, which in turn, might hurt margins.

On the bright side, GNC Holdings' international business has been a key growth driver for the company in recent years. Revenues at this segment increased 14.1% on higher cross-border e-commerce sales in China last quarter.

In March 2018, the company announced plans to expand its presence in India. The company operates in collaboration with the master franchise partner, Guardian Healthcare Services Pvt. Ltd, in the country.

Per the latest announcement, Guardian will add GNC Holdings' products to 4000-plus stores across India by 2020. In this regard, 1000 new stores are expected to shelf GNC products in 2018 compared with approximately 50 retail locations at present. This apart, the company has been targeting other channels like retailing, e-commerce and distribution for expansion.

Of late, the company has been experiencing solid growth in China. In this regard, last December, GNC Holdings announced plans of entering into a strategic partnership and joint-venture agreement with Harbin Pharmaceutical Group Holding Co., Ltd. Meanwhile, the company witnessed improvement in trends in Mexico, South Korea and Hong Kong.

Although immaterial for the to-be-reported quarter, the ongoing tension between United States and China regarding the imposition of tariffs on imports has raised concerns for  MedTech players as any adverse move may affect their sales performance in China in near term.

Furthermore, the performance of One New GNC is improving gradually. Notably, in 2017, more than 11 million consumers joined the company's loyalty programs. PRO Access, the company's premium loyalty offering, enrolled nearly 850,000 members since its launch in March 2017. Apart from this, management is working on product pricing and innovation. Meanwhile, new consumer enrolment under the myGNC Rewards Program and launch of GNC storefront on Amazon buoy optimism.

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