Shares of GNC Holdings Inc Fall on a Flat Quarter -- Is That Enough to Sell?

By Markets Fool.com

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

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What: Shares of GNC Holdings Inc fell as much as 13% on Thursday after the specialty retailer of health and wellness products announced first-quarter results that fell short of Wall Street estimates with regard to revenues and earnings per share and issued a lukewarm outlook for full-year profits.

So what: Here's how the numbers shake out:

Actual

Analysts' Consensus Estimate

Q1 Revenues MISS

% Surprise

$670.2 million

(3.5%)

$694.3 million

Q1 Earnings per-Share* MISS

% Surprise

$0.75

(7.4%)

$0.81

Guidance

Analysts' Consensus Estimate

2015 Earnings per Share

$3.00-$3.15

$3.15

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*Adjusted. Source: Thomson Financial Network, GNC Holdings

Note that the company's revised guidance range for 2015 earnings per share of $3.00 to $3.15 is wider on the downside -- than the previous range of $3.10 to $3.15.

The problem this quarter began on the top line, with consolidated revenues falling 0.6% year-on-year, thanks in part to negative same-store sales in the Retail segment (the company's largest). To their credit, GNC's management did not try to blame all and sundry (strong dollar, poor weather, cat in a tree, etc.) for the miss, with Mike CEO Archbold referring to "largely self-inflicted wounds," citing the company's reduced engagement with customers as it dialed back on promotions and reassessed its marketing strategy, on a call with the media. "To be clear, this was our mistake," Archbold went on to emphasize.

Now what: GNC's management owns this quarter's poor results and has identified some of the causes (or believes it has, at least), so it's not unreasonable to think they can address them over the next several quarters. At any rate, GNC appears to have a narrow competitive advantage and the shares, priced at less than 13 times forward earnings and 14 times cash flow, look relatively cheap. In that context, long-term shareholders ought to be able to look past this mediocre performance and the small adjustment to this year's earnings guidance.

The article Shares of GNC Holdings Inc Fall on a Flat Quarter -- Is That Enough to Sell? originally appeared on Fool.com.

Alex Dumortier, CFA has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.