GNC in danger of being delisted from stock exchange as debt payment looms
The company disclosed yesterday that it had received a notice from the stock exchange on April 22. The NYSE requires companies listed on its exchange to maintain a minimum average closing price of $1.00 per share over a period of 30 consecutive trading days, and an average market capitalization of at least $50 million over a period of 30 consecutive trading days, unless at the same time the company’s total stockholders’ equity is equal to or greater than $50 million.
As set forth in the notice, as of April 21, 2020, the 30 trading-day average closing share price of the GNC’s stock was $0.56, the 30 trading-day average market capitalization was approximately $47.3 million and its last reported stockholders’ equity as of December 31, 2019 was approximately a negative $207.3 million.
Notice comes on top of big layoffs, looming debt payment
Earlier this month GNC announced it had furloughed a significant portion of its workforce. This was partly due to the dislocations caused by the pandemic crisis. But it also has to do with the company’s inability to refinance $445.1 million in debt that comes due in May. In a March 26 conference call CFO Tricia Tolivar could not give assurances that the company would be able to service its debts after Asian investors declined to restructure that loan and other debt.
GNC is particularly hard hit during the present crisis because of its store structure and where its stores are located. In some states like Nevada and Colorado standalone vitamin stores have been considered nonessential businesses and some have been forced to close. And GNC has up to 900 underperforming stores it has been working to close located in shopping malls, many of which have been closed entirely during the current spate of state-mandated stay at home orders.
Market shifts put company in difficult position
Sales of many categories of dietary supplements, particularly immune health products, have increased markedly during the current disease crisis. Pre workout products are one subset of the market that reportedly has suffered, as almost all gyms are closed and consumers have turned to other priorities. Sports nutrition products have been one of GNC’s hallmarks over the years. In addition, consumers who are seeking to minimize their potential infection risks have been making online purchases of many goods normally purchased in person, such as groceries.
These shifts seem to have caught GNC flat footed. The company does have an online presence but still operates a huge lineup of retail outlets from which it derives the lion’s share of its revenue.
GNC said to be developing plan to return to compliance
NYSE rules allow a company 45 days to come into compliance with listing requirements before a stock is delisted. In a statement, GNC said, “The Company is currently evaluating its available options and developing a plan to return to conformity with the minimum market capitalization requirement.”
GNC stock once briefly traded for more than $60 a share in 2013 and as recently as April 2016 was routinely trading at more than $30 a share. The company’s shares entered the penny stock realm in mid March and have traded for as low at 40 cents a share. The stock price sits at about 59 cents today.
Revenue has been contracting for a number of years in a row. The company’s high point for trailing 12 months revenue was in late 2015 at about $2.7 billion. That figure fell to slightly more than $2 billion at the end of 2019. The last time GNC posted year over year quarterly revenue growth was in late September of 2015.
