GNC Holdings on Thursday reported second quarter consolidated revenue fell to $617.9 million from $650.2 million in the year-ago quarter. Its September sale of Lucky Vitamin reduced revenue by $22.6 million, according to a company press release.
Same-store sales fell 0.4% in domestic company-owned stores (including GNC.com) and fell 4% in domestic franchise locations, the company said.
Profits also declined. Net income fell to $13.3 million from $16.6 million in the prior year quarter, as adjusted net income fell to $16.9 million from $28.8 million in the prior year quarter. Adjusted earnings before interest, taxes, depreciation, and amortization fell to $63.5 million from $74.8 million a year ago.
GNC beat most estimates despite its sales and profit declines, and executives told analysts on Thursday that its turnaround is going well even as competition in supplements is heating up.
"While domestic retail comps were a bit softer than we would have liked, we saw strong performance from our e-commerce business and International segment, areas we believe will continue to drive growth," CEO Kenneth A. Martindale said during a Thursday conference call, according to a transcript from Seeking Alpha. We've recently noticed an uptick in competitive activity in the U.S. market. As a result, we've made some limited price and promotion adjustments and will continue to monitor the marketplace and react accordingly."
Its international sales, especially in China, are faring better, he also said. The company is awaiting regulatory approval of its proposed joint venture with Chinese pharmaceutical company Harbin Pharmaceutical Group, which Martindale said will accelerate its expansion into China and provide an additional catalyst for international growth.
E-commerce is another bright spot and, unlike other retailers, GNC's margins are higher online, both through its own site and via Amazon, Chief Financial Officer Tricia Tolivar told analysts. E-commerce sales were 8.3% of revenue in the U.S. and Canada in the second quarter compared with 5.5% a year ago, driven by growth in revenue from both sites.
The company is introducing more private labels, which now make up 50% of its assortment, up from 43% a year ago, and serve as important drivers of gross margin growth and the retailer's ability to differentiate its shopping experience, Martindale also said.
GNC's relaunched AMP sports line grew year-over-year for the first time in three years, he noted. In September, the company will introduce a proprietary line of herbal and botanical supplements free of GMOs, artificial colors and sweeteners, aimed at wellness-conscious consumers in search of plant-based options without artificial and engineered ingredients, which Martindale called a "fast-growing $7 billion herb and botanicals market."