GNC Holdings reported on Thursday that consolidated revenue fell to $641.0 million in the second quarter, from $673.2 million in the period last year. Same-store sales dropped 0.9% in domestic company-owned stores (including e-commerce sales) and fell 1.1% in domestic franchise locations, according to a company press release.
Adjusted EPS was 41 cents per share, down from the 79 cents per share in the year-ago period, but beating analyst expectations cited by the Pittsburgh Post-Gazette by a penny.
The company has reached 80% of its goal this year for the revamped loyalty program, with 7.8 million members, executives told analysts on a conference call Thursday, according to a transcript from Seeking Alpha. “After six months, we continue to believe myGNC members are on track to visit six times a year compared with Gold Card members who visited just four times in an entire year,” CEO Robert Moran said, despite the fact that discontinuing Gold Card dragged down North America sales by $15.1 million.
GNC executives requested patience in February as the company began a series of changes to sales and marketing — and so far investors are giving it to them. They returned to speak to analysts Thursday regarding their second quarter, and maintained that the company's new loyalty program in particular is gaining traction.
"We are attracting new customers to GNC, they are shopping more frequently and we're converting more of them," Moran told analysts, adding that transactions for the quarter were up 12.3%, and that increases in transactions and same-store sales noted in the quarter continued into the early days of the third quarter.
In addition to ongoing benefits from the mass shuttering-and-reopening event late last year that was both a literal and symbolic rebirth of the company’s approach, GNC earlier this year opened a storefront on Amazon (sales from that are included in its e-commerce sales, the company said). The stores have also shifted the emphasis of the customer experience from driving staff to boost loyalty membership to training associates to have conversations around how supplements can solve customer problems, like marathon or sports training regimens or addressing health issues like sleep problems. To help sales associates, the company has provided them with tablets so that information is at their fingertips, executives told analysts. The company is also being more mindful about discounts, moving to cut prices in a way that is more targeted, more “meaningful” to customers and will drive traffic, executives said.
Despite the report of falling sales and revenue, Moran went so far as to say that these changes are helping GNC stay above the current retail fray.
"In many ways, this business is bucking the retail trend, with transaction growth that's well above the APT Retail Index year-to-date," he said. "The challenges in our sector are well-publicized, as are concerns about the future of retail, but we believe there is an opportunity for business models like GNC that listen and respond to the customer and give them products and experiences they can't get anywhere else."
Digital sales improved overall, thanks to assortment and pricing adjustments, executives said. And Amazon is proving to be a boon to the company. "[W]e're pleased with the performance of the GNC Store on Amazon, which features our best products and is consistently priced with gnc.com and our retail locations," Moran said. "Because more than 50% of online product searches happen on Amazon, and of those, 37% buy that product in the store, we believe Amazon is not a death knell for brick-and-mortars, but a great advertising platform that puts us right in the path of countless new customers."