GNC said Thursday that it has appointed director Robert Moran as interim CEO. Moran served as chairman and CEO of PetSmart Inc. before joining the GNC board in July 2013.
The vitamins and dietary supplements specialty retailer also said it’s still engaged in a strategic review process. In May, GNC had announced that it was exploring a range of strategic options, such as accelerated refranchising strategies, partnerships and other collaborations, and a potential sale of the company.
“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,” GNC chairman Michael Hines said in a statement. “During Bob’s four decades as a successful retail executive, he demonstrated a proven ability to lead organizations in highly competitive environments and deliver profitable growth and shareholder value. His insights and perspective have been valuable during his tenure as an independent director, and we are grateful for his willingness to step into the interim CEO role at this time.”
Before joining PetSmart in 1999, Moran was president of Toys R Us Canada after serving in various executive positions in finance and merchandising at Sears, Roebuck & Co. including as president and CEO of Sears de Mexico. Previously, he was chief financial officer of Galerias Preciados, a leading Spanish retailer.
“Over the past few years, I have become familiar with the business and its potential, and I have the utmost confidence in GNC’s prospects,” Moran stated. “I look forward to working closely with the board and the talented team across GNC to serve our customers, deliver improved financial performance, and continue our strategic review as we work to change the trajectory of the business and enhance shareholder value.”
Archbold joined GNC as a board member and CEO in August 2014. Prior to that, he served as CEO of Talbot’s Inc. and, previously, president and chief operating officer of Vitamin Shoppe Inc.
“I want to thank Mike for his contributions to GNC as CEO, including recruiting strong new talent to the management team and initiating a significant refranchising plan in the face of a challenging environment,” Hines commented. “We wish him well in the future.”
GNC on Thursday also reported a 2.4% sales decrease for the 2016 second quarter. Same-store sales fell 3.7% in domestic company-owned stores and by 6.6% in domestic franchise locations. Net income declined for the quarter, though the company posted gains in earnings per share.
As of June 30, GNC had 3,506 corporate stores in the United States and Canada, 1,163 domestic franchise locations, 2,343 Rite Aid franchise store-within-a-store locations and 2,075 international stores. Overall, the retailer has 9,087 store locations worldwide.
“After only two years of an attempted turnaround, CEO Mike Archbold was replaced with interim CEO Robert Moran, an independent director for GNC and the former CEO of Petsmart Inc. While the new CEO assesses problems, full-year guidance has been suspended. A new game plan is expected during the 3Q ’16 call,” Jefferies analyst Mark Wiltamuth said in a research note Thursday. “Pressured by mass retailers, lower-priced Internet options, structurally eroding mall traffic (malls are 35% of sales), and a customer accustomed to aggressive promos, we see no easy fixes.”
GNC said it refranchised 86 corporate stores in the second quarter and remains on track to meet its goal refranchising 200 company-owned stores in 2016.
“While the idea of transitioning to a more capital-light business model that should enhance ROIC is enticing, we struggle to understand how the company will be able entice franchisees to commit to new stores with the U.S. franchised comp running -6.6% and international -1.6%,” Wiltamuth wrote. “An underlying issue may be that franchisees don’t believe in the corporate strategy, evidenced by their lack of participation in corporate promos and/or an expanded assortment initiative.”
In December 2013, GNC expanded its partnership with Rite Aid Corp. The agreement extended the Rite Aid-GNC partnership to 2019 and allowed Rite Aid to put at least 300 more GNC LiveWell sections inside its stores over the ensuing five years. Rite Aid is currently in the process of being acquired by Walgreens Boots Alliance, pending approval by the Federal Trade Commission. Published reports say WBA is currently hashing out with regulators the number of drug stores — Rite Aid and/or Walgreens locations — that it would need to divest to gain antitrust clearance for the deal from the FTC.
The online channel remains the primary retail outlet for purchases of vitamins, minerals and supplements (VMS), according to TABS Analytics. Pure-play Internet sellers continue to dominate online VMS sales, with a 78.1% share versus 29.1% for brick-and mortar online sales, according to the 2016 TABS Analytics Vitamin and Minerals Supplements study. Online VMS retailers with brick-and-mortar stores that lifted share versus 2015 were Vitamin Shoppe, Target, GNC and Costco, TABS reported. Online retailers losing share in that time frame included drugstore.com, Walmart, CVS, eBay, Amazon, Vitamin World and Walgreens.