Why GNC Holdings Stock Fell 22.6% in October

11/13/17

By Joe Tenebruso, MotleyFool

What happened

Shares of GNC Holdings (NYSE:GNC) dropped nearly 23% last month, according to data provided by S&P Global Market Intelligence, after the nutritional supplements retailer delivered third-quarter results that disappointed investors.

So what

GNC's third-quarter revenue fell 3% year over year to $609.5 million. That came in below Wall Street's expectations of $616 million.

Worse still, adjusted earnings per share plunged 46% to $0.32, and also missed the consensus estimate of $0.33.

A man with his head down on a table in front of a plunging profit chart.

IMAGE SOURCE: GETTY IMAGES.

Now what

GNC's stock price has continued its descent in November, with its shares already down another 15% so far this month. In all, it has lost nearly half of its value in 2017 and more than 80% in the past three years. It's been a brutal time to be a GNC shareholder and, unfortunately, more pain may lie ahead.

The company is facing intense competition from larger retailers and e-commerce sites. Perhaps most worrisome is that the biggest, baddest online retailer -- Amazon.com (NASDAQ:AMZN) -- recently entered the nutritional supplements arena with the launch of its Amazon Elements line of vitamins.

Amazon Elements vitamins and supplements

IMAGE SOURCE: AMAZON.COM.

When Amazon joins a fight, it tends to be bad news for all of the other businesses competing in that industry. And I don't see it being any different this time around.

GNC is already struggling with declining margins, something that's likely to remain the case now that Amazon CEO Jeff Bezos -- with his "your margin is my opportunity" approach -- has set his sights on eating GNC's lunch.

Moreover, GNC ended the third quarter with nearly $1.4 billion in long-term debt and only $40 million in cash, which will make it difficult for it to weather any further downturn in its business.

For these reasons, investors may be best served by staying clear of GNC Holdings' stock.

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