GNC Is Having A Rough Morning

Shares of GNC Holdings Inc GNC plummeted more than 13 percent Thursday after the company reported its fourth quarter results and issued an update to its dividend payout.

GNC said it earned $0.07 per share in the fourth quarter on revenue of $569.93 million. Wall Street analysts were expecting the company to earn $0.36 per share on revenue of $571.01 million.

Same-store sales of domestic company-owned stores (including GNC.com) fell 12 percent in the quarter, while domestic franchise locations saw a same-store sale decrease of 6 percent. Moreover, net loss for the quarter worsened to $433.447 million from $42.922 million in the same quarter a year ago as the company recorded $473.5 million in non-cash long-lived asset impairments in the current quarter of which $471.1 million related to goodwill and $2.4 million related to property and equipment.

Interim CEO Bob Moran acknowledged the quarter results were "well below expectations" but it doesn't reflect the ongoing initiatives to improve the business, including the implementation of more competitive pricing and loyalty programs.

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"We are aware that the changes we have made have short-term financial impacts and while it is still in the early days, and it will take time for our investments to bear fruit, we are encouraged by the trends we're seeing and believe the One New GNC can help the company return to profitable growth," the executive added.

The stock traded recently at $7.22, down 13.2 percent.

Dividend Suspension

GNC's stock pays a quarterly dividend of $0.20 per share, which implied an approximate 9.6 percent yield. However, the company's board of directors approved management's recommendation to suspend the dividend as part of a broader plan to use the cash to reduce its debt.

The dividend suspension will free up approximately $55 million of cash annually and use of the cash will strengthen its balance sheet and restore GNC's financial flexibility and liquidity.

The dividend reduction likely surprised investors as some analysts suggested the attractive dividend yield adds downside protection to the stock.