GNC ousts chief executive as sales continue to fall
Shares plummet after sudden change at top
Two years after GNC Holdings hired top retail industry executive Michael Archbold to reverse a downturn, he has been replaced by GNC board member Robert Moran, a former chairman and chief executive of PetSmart Inc. who said he will “move with urgency” to improve the struggling vitamin and wellness company’s performance.
In a surprise announcement Thursday, the Downtown-based retailer said Mr. Moran, 65, would become interim chief executive effective immediately.
Mr. Archbold has also resigned from the board, the company said.
The news came as GNC reported that second quarter sales declined and that it would temporarily suspend its full-year guidance.
GNC is in the midst of a strategic review of its operations that includes possibly selling the company. Its struggles have included investigations by two state attorneys general into its labeling and ingredients; increased competition from Internet sales; and a stock price that has fallen by about 50 percent over the past year.
On Thursday, GNC’s shares plummeted to $20.28, down 26 percent.
The decision to suspend full-year guidance “in no way diminishes our commitment to moving quickly to enhance performance,” Mr. Moran said in a conference call with analysts. “Nor does it reflect the lack of confidence in our long-term prospects.”
Asked whether he might become the full-time CEO at GNC or whether the board was preparing to sell the business, Mr. Moran said it was “too premature to even address that right now.”
He called the second-quarter results “disappointing.”
Revenue fell by 2.4 percent to $673.2 million from the year-ago quarter and net income declined by 5 percent to $64 million.
Adjusted earnings of 79 cents per share — which excluded a pre-tax gain of $17 million from the sale of 86 company-owned stores to franchises — beat analysts’ estimates of 78 cents.
Same-store sales fell 3.7 percent in company-owned stores and were down 6.6 percent in franchise locations.
Mr. Moran blamed the decline in same-store sales — the standard used in reporting retail results so that newly opened stores don’t affect the numbers — on soft demand for vitamins, food and drink products, and lower customer traffic, especially in shopping mall stores that account for 35 percent of GNC’s total revenues.
Same-store sales also include online sales at the company’s website.
Mr. Moran said traffic to the website continues to decline and is being evaluated along with brick-and-mortar locations.
He and the management team plan to “conduct a frank and honest assessment of the business, what’s working and what’s not,” he told analysts, adding, “There are no magic bullets or overnight solutions.”
Because of falling sales, management needs to have “a healthy disrespect for the status quo,” he said.
While the market for vitamins and supplements is growing as consumers become more health-conscious, GNC and other vitamin and supplement retailers have been hurt in recent years by private-label brands sold in supermarkets, drugstores and on the web.
A 2015 report from Global Industry Analysts in San Jose, Calif., said only 14 percent of consumers purchase vitamins and supplements at specialty health care stores.
Mr. Moran joined GNC’s board in 2013, a month after he retired from PetSmart, where he spent 14 years in top executive positions. Before that, he was president of Toys R Us Canada, and held executive jobs in finance and merchandising with Sears, Roebuck & Co.
Prior to Mr. Archbold coming on board in 2014, Joseph Fortunato was GNC’s chief executive for nearly a decade. He had more than two decades of experience with GNC in executive jobs before being pushed aside unexpectedly when the board brought in Mr. Archbold.
Mr. Archbold was previously chief executive at apparel retailer Talbots Inc. and before that held top executive posts at the Vitamin Shoppe chain.
Commenting on the leadership change, GNC Chairman Michael Hines said, “As we continue the strategic review process and move with urgency to improve performance, the board believes it is the right time to undertake this change to drive effective execution of our plans.”