Presentation accompanying Q earnings release. April 30, 2015

Transcription

1 Presentation accompanying Q earnings release April 30, 2015

2 Forward looking statement THIS CONFERENCE CALL AND PRESENTATION CONTAINS FORWARD-LOOKING STATEMENTS WHICH INCLUDE INFORMATION CONCERNING OUR FUTURE RESULTS, TRENDS, AND OTHER INFORMATION THAT IS NOT HISTORICAL INFORMATION. ALL FORWARD-LOOKING STATEMENTS INCLUDED ON THIS CALL AND IN THIS PRESENTATION ARE BASED ON INFORMATION AVAILABLE TO US ON THE DATE OF THIS CALL, CURRENT EXPECTATIONS, AND VARIOUS ASSUMPTIONS. WE BELIEVE THERE IS A REASONABLE BASIS FOR OUR EXPECTATIONS AND ASSUMPTIONS, BUT THEY ARE INHERENTLY UNCERTAIN, AND MAY NOT PROVE CORRECT. WE UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE, OR REVISE, ANY FORWARD- LOOKING STATEMENT, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS, OR OTHERWISE. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS, ATTRIBUTABLE TO US, OR PERSONS ACTING ON OUR BEHALF, ARE EXPRESSLY QUALIFIED, IN THEIR ENTIRETY, BY THE CAUTIONARY STATEMENTS CONTAINED THROUGHOUT THIS CALL. FOR A LIST OF IMPORTANT FACTORS THAT COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE FORWARD-LOOKING STATEMENTS ON THIS CALL AND IN THIS PRESENTATION, PLEASE REFER TO OUR PUBLIC FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION AND OUR EARNINGS RELEASE THIS MORNING. 2

3 Developing team to focus and execute on our strategy Filled leadership positions Mike Dzura, Executive Vice President of Operations Tricia Tolivar, Executive Vice President and Chief Financial Officer 3

4 Deep dive analytics Promotions Findings Q1 planned sales did not reflect full impact of prior year promotions Sales recapture initiatives Cycling unprofitable prior year promotions Impact lessens in Q3 15 and beyond 4

5 Deep dive analytics Promotions Findings Q1 planned sales did not reflect full impact of prior year promotions Marketing Engaged with customers less this quarter than in the prior year Sales recapture initiatives Cycling unprofitable prior year promotions Impact lessens in Q3 15 and beyond Restore marketing spend More consistent with the prior year Improved effectiveness of spend 5

6 Deep dive analytics Promotions Findings Q1 planned sales did not reflect full impact of prior year promotions Marketing Engaged with customers less this quarter than in the prior year Sales recapture initiatives Cycling unprofitable prior year promotions Impact lessens in Q3 15 and beyond Restore marketing spend More consistent with the prior year Improved effectiveness of spend Incremental initiatives Expanding assortment Improving customer experience 6

7 Brand Evolution Connecting our customers to their best Meaningful, longterm connections with our customers Deep expertise in health, wellness, and performance Customized plans to meet customers' unique goals through associate interactions Best-in-class shopping experience Customer-driven decision-making & rigorous quality standards One-to-one customer engagement 7

8 Brand Evolution Meet customers unique goals Continuing to expand our customer base 8

9 Brand Evolution Meet customers unique goals Continuing to expand our customer base 9

10 Marketing 10

11 Connecting our customers to their best Meaningful, longterm connections with our customers Deep expertise in health, wellness, and performance Customized plans to meet customers' unique goals through associate interactions Best-in-class shopping experience Customer-driven decision-making & rigorous quality standards One-to-one customer engagement 11

12 Q $ in thousands; unaudited Consolidated results Q1 Comments Revenue $670,247 $674,456 Cost of sales, including warehousing, distribution and occupancy 420, ,737 Gross profit 249, ,719 Same-store sales decreased 4.1% Product margin improvement offset by deleverage % of Revenue 37.2% 37.6% Total SG&A $139,768 $134,612 % of Revenue 20.9% 20.0% Other expense (income), net 60 (2,148) Operating income $109,605 $121,255 Interest expense, net 11,515 11,531 Advertising expense decreased Unusual SG&A items: $1.8M net expense for increased legal accrual and decreased bad debt $2.8M expense associated with payroll accrual error Income before income taxes 98, ,724 Income tax expense 34,820 39,821 Net income $63,270 $69,903 Diluted earnings per share $0.72 $0.75 Unusual items resulted in $0.03 reduction of EPS 12

13 Q $ in thousands; unaudited Retail segment Q1 Revenue $503,466 $508,998 Comp Store sales, including GNC.com -4.1% -0.7% Operating Income $92,362 $94,746 % of Revenue 18.3% 18.6% Franchise segment Q1 Domestic $74,903 $61,960 International $36,354 $41,554 Total revenue $111,257 $103,514 Operating Income $39,683 $39,581 % of Revenue 35.7% 38.2% Revenue decreased 1.1% Retail segment Comments Segment results Comp sales decline partially offset by 138 net new stores compared with Q Q1 operating income decreased 2.5% Excluding $2.8M payroll accrual error, operating income dollars increased 0.4%; operating income rate was 18.9% Improved product margin and lower advertising spend were partially offset by expense deleverage Added 19 net new stores in the current quarter Manufacturing / Wholesale segment Q1 Revenue $55,524 $61,944 Operating Income $21,122 $23,511 % of Revenue 38.0% 38.0% 13

14 GNC.com 14

15 Q $ in thousands; unaudited Retail segment Q1 Revenue $503,466 $508,998 Comp Store sales, including GNC.com -4.1% -0.7% Operating Income $92,362 $94,746 % of Revenue 18.3% 18.6% Franchise segment Q1 Domestic $74,903 $61,960 International $36,354 $41,554 Total revenue $111,257 $103,514 Operating Income $39,683 $39,581 % of Revenue 35.7% 38.2% Revenue decreased 1.1% Retail segment comments Segment results Comp sales decline partially offset by 138 net new stores compared with Q Q1 operating income decreased 2.5% Excluding $2.8M payroll accrual error, operating income dollars increased 0.4%; operating income rate was 18.9% Improved product margin and lower advertising spend were partially offset by expense deleverage Added 19 net new stores in the current quarter Manufacturing / Wholesale segment Q1 Revenue $55,524 $61,944 Operating Income $21,122 $23,511 % of Revenue 38.0% 38.0% 15

16 Q $ in thousands; unaudited Retail segment Q1 Revenue $503,466 $508,998 Comp Store sales, including GNC.com -4.1% -0.7% Operating Income $92,362 $94,746 % of Revenue 18.3% 18.6% Segment results Franchise segment comments Franchise segment Q1 Domestic $74,903 $61,960 International $36,354 $41,554 Total revenue $111,257 $103,514 Operating Income $39,683 $39,581 % of Revenue 35.7% 38.2% Manufacturing / Wholesale segment Q1 Revenue $55,524 $61,944 Operating Income $21,122 $23,511 % of Revenue 38.0% 38.0% Revenue increased 7.5% due to 3 rd party wholesale product sales Revenue decreased 12.5%; excluding Venezuela, local currency comps were +1.1% Converted 2 company-owned stores totaling $0.3M to franchises, compared with 6 and $2.3M in Q Operating income increased 0.3% Excluding 1) store conversions and 2) a decrease in bad debt, operating income margin declined due to higher mix of 3 rd party wholesale product sales New stores: 1 net new domestic franchise, 1 net new store in China, and opened 18 and closed 37 international franchise locations in the current quarter 16

17 Q $ in thousands; unaudited Retail segment Q1 Revenue $503,466 $508,998 Comp Store sales, including GNC.com -4.1% -0.7% Operating Income $92,362 $94,746 % of Revenue 18.3% 18.6% Segment results Manufacturing/Wholesale segment comments Franchise segment Q1 Domestic $74,903 $61,960 International $36,354 $41,554 Total revenue $111,257 $103,514 Operating Income $39,683 $39,581 % of Revenue 35.7% 38.2% Manufacturing / Wholesale segment Q1 Revenue $55,524 $61,944 Operating Income $21,122 $23,511 % of Revenue 38.0% 38.0% Revenue decreased 10.4% Lower 3 rd party contract manufacturing revenue Opened 8 Rite Aid locations in the current quarter 17

18 Q cash flow highlights Generated $116.9 million in operating cash flow Capital expenditures of $7.5 million Generated $109.7 million in free cash flow Paid $15.8 million in cash dividends Repurchased $60.8 million in shares of our common stock Q1 cash balance of $166.9 million 18

19 2015 Full Year Outlook EPS ~$ $3.15, excluding unusual items Low single digit increase in consolidated revenue for the full year Q2 comp: low single digit decline to flat Rest of year comp: low single digit increase Modest revenue growth internationally Manufacturing / Wholesale segment revenue generally in-line with 2014 levels Underlying assumptions: Retail product gross margin improvements Share repurchases ~5-6% 19

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