What happened

Shares of GNC Holdings (GNC) were down 14.1% as of 3:30 p.m. EST Tuesday after the health and nutrition products retailer announced disappointing fourth-quarter 2018 results.

More specifically, GNC's quarterly revenue declined 2.6% year over year to $547.9 million, translating to an adjusted net loss of $10 million, or $0.13 per share, narrowed from a $0.26-per-share loss in the same year-ago period. Analysts, on average, were anticipating adjusted net income of $0.03 per share on revenue of $550 million.

GNC Live Well logo in red.


So what

GNC's top-line decline was driven by a combination of strategic store closures and a 0.6% decline in domestic same-store sales. At the same time, international segment revenue climbed 12%, and investors were encouraged by a separate press release announcing a new strategic joint venture with International Vitamin Corporation (IVC). In February 2019, GNC also completed the final tranche of a previously announced $300 million investment in the company by China's Harbin Pharmaceutical.

Under the IVC joint venture, GNC will receive roughly $176 million -- including $101 million this year and an additional $75 million over the next four years, with the latter adjusted up or down based on the joint venture's future performance -- in exchange for certain manufacturing facility assets and a 43% ownership stake in the JV. GNC will be responsible for product development and innovation, and IVC will handle manufacturing and supply chain integration.

"While fourth quarter operating results were below our expectations, we recently achieved some major milestones in repositioning the company," stated GNC chairman and CEO Ken Martindale. "The completion of Harbin's $300 million strategic investment strengthens our capital structure and will accelerate our growth plans in China, while our $176 million strategic partnership with International Vitamin Corporation will create meaningful efficiencies in manufacturing, further strengthen the innovation and product development capabilities that set GNC apart and drive further reductions in our debt."

Check out the latest earnings call transcript for GNC Holdings.

Now what

GNC opted not to provide specific financial guidance for the coming year. But during the subsequent conference call, management did add that the company plans to use most of its free cash flow in 2019 to pay down debt. GNC CFO Tricia Tolivar also noted the company is working with both of its aforementioned joint venture partners "on initiatives that will enhance our long-term strategy."

That's all well and good. But until those joint ventures show more tangible signs of progress, and given GNC's relative underperformance in the meantime, it's no surprise to see the stock falling today.