GNC Holdings (NYSE: GNC) has been on a rollercoaster ride over the last two months as the company pre-announced positive same-store sales and earnings, followed up the announcement with an equity transaction and joint venture agreement, and subsequently appeared to finalize (pending typical closing considerations) a debt extension. The combination of events helped to alleviate short-term concerns about the potential for bankruptcy in the face of approaching debt maturities, although so far, the brief increases in share price have generally been met with runoffs in subsequent days. The company has avoided imminent challenges, as we expected, and has indicated promising near-term results, although challenges remain and short interest - a proxy for market skepticism - remains high.
We’ve refrained from commenting on GNC since the end of the year, partially due to our research efforts being focused elsewhere, but also due to the fact that, barring a corporate transaction or debt refinancing, there was relatively little of value to add to the discussion of the company. The conclusion of the fiscal year, coupled with a prospective corporate transaction and debt refinancing, however, provides a basis for revisiting our earlier projections, updating our analysis and reviewing our position in GNC to determine whether recent events require any adjustments. We also take a tentative look at the future.
