GNC Holdings' Global Prospects Solid, Competition Stiff

On May 2, we issued an updated research report on GNC Holdings, Inc. GNC. We are upbeat about the company’s strategies to strengthen international presence. However, cut-throat competition continues to pose a challenge. The stock currently carries a Zacks Rank #3 (Hold).

This leading global specialty retailer of products for health and wellness, including vitamins, minerals, herbal supplement, sports nutrition and diets, has been underperforming its industry over the past year. The company has lost 50.9% compared with the 21.4% decline of the industry.

GNC Holdings exited the first quarter of 2018 on a dismal note with year-over-year decline in adjusted earnings and revenues. Additionally, in the United States, GNC Holdings competes with heavily advertised national brands of large pharmaceutical and food companies as well as other retailers. This leads to increased price competition for the company as more participants are entering the market.

 

On a positive note, GNC Holdings’ international business has been a key driver of growth in recent years. Management expects to continue capitalizing on international revenue growth opportunities through the addition of franchise stores in existing markets, expansion into new high-growth markets and the growth of product distribution in both existing and new markets.

In this regard, GNC Holdings recently announced the receipt of Hayao shareholders’ vote for the strategic partnership and China joint venture agreement with Harbin Pharmaceutical Group Holding (Hayao). Further, the company recently entered into a master franchise agreement with Rapid Nutrition to foray into Australia.

At the same time, GNC Holdings has announced plans to expand presence in India where it operates in collaboration with the master franchise partner — Guardian Healthcare Services Pvt. Ltd. All these developments help boost investors’ faith in the stock.

Also, the company has progressed significantly through its e-commerce business. Per management, e-commerce business continues to grow higher than expected. Moreover, the company is upbeat about the shift of control of the website from a third party to a cloud-based, company-controlled platform.

Key Picks

A few better-ranked stocks in the broader medical sector are Intuitive Surgical ISRG, The Cooper Companies, Inc. COO and Baxter International Inc. BAX. While Intuitive Surgical sports a Zacks Rank #1 (Strong Buy), The Cooper Companies and Baxter carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical has a long-term expected earnings growth rate of 12.1%.

The Cooper Companies has long-term expected earnings growth rate of 10.8%.

Baxter International has a long-term expected earnings growth rate of 13.4%.

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