GNC Holdings’ annual shareholders meeting convened and adjourned in less than 10 minutes Tuesday at the Westin William Penn hotel, Downtown, after approving board directors, a pay proposal and the ratification of an independent auditing firm.
Afterward, a self-described “nervous” shareholder approached interim CEO Robert Moran, seeking reassurance that the health and wellness retailer’s five-month-old One New GNC campaign will bear fruit.
He well could have been any of a number of GNC shareholders these days.
“Any time you’re in a turnaround, people are nervous,” Mr. Moran said later.
For those holding GNC stock, it has been a rough six months following an even rougher three years in which shares fell from $60.18 in November 2013 to $15.40 in November 2016 to Monday’s $7.45 close.
The steady decline prompted Mr. Moran and the GNC board to hit the reset button in late December, closing stores for a day to prepare for the One New GNC launch. The program offers simpler, and often lower, pricing meant to draw customers back to the company’s stores and its website.
For the first quarter, transactions were up 9.3 percent but net income and earnings per share landed markedly below the previous year’s results. Then there was the National Football League’s rejection of GNC’s planned Super Bowl ad and, earlier this month, a decision by GNC to abandon plans to extend its $1.1 billion term loan in the face of unfavorable rate quotes from lenders.
Currently, investors are shorting 25.56 million, or 37 percent, of GNC’s 68.4 million outstanding shares, a broad bet that the Pittsburgh-based company will continue to struggle.
“We want to prove them wrong,” said Mr. Moran of those shorting GNC stock. He added that the company will try again for an extension before the loan matures in March 2019.
Where investors and lenders are holding back — or merely holding their breath — Mr. Moran sees opportunities for both GNC and the overall vitamin and supplement business, which he said is expected to grow 6.3 percent annually over the next five years.
“We feel we’ve positioned ourselves to get our fair share of that very healthy industry.” Earlier this month, Mr. Moran bought 300,000 shares of GNC stock at a cost of more than $2 million, a move that the shareholder who approached the chief executive on Tuesday later said convinced him to hold onto the stock.
With the implementation of One New GNC and its simplified pricing, the interaction between store associates and customers focuses on helping customers find what they want, Mr. Moran said, rather than taking up time explaining a complex multi-level price structure or pitching Gold Card loyalty memberships.
“We have a saying that the most valuable real estate we have is the three feet between the associate and the customer.”
The One New GNC campaign may still be in its infancy, but Mr. Moran noted stores that piloted the business model last fall are seeing 4 to 5 percent more transactions than the rest of the chain. As customer traffic grows, he said, the issue then becomes, “How do we sell one more item?”
Mr. Moran, former chairman and CEO of Petsmart Inc., joined the GNC board three years ago and took over after previous president and CEO Mike Archbold in July.
Mr. Moran said the company is vetting and interviewing CEO candidates, but there’s no hard timeline to name a replacement. He said he intends to remain on the board after a new CEO is in place.
GNC shares closed Tuesday at $7.23.
Steve Twedt: stwedt@post-gazette.com or 412-263-1963.
First Published: May 24, 2017, 4:28 a.m.
