GS Goldman Sachs Group Inc

By Sara Germano and Austen Hufford 

GNC Holdings Inc.'s board has started a strategic review that could result in the sale of the company, days after the retailer of vitamins and supplements warned its turnaround efforts were struggling to lift sales.

The company, which has more than 9,000 stores and franchised locations, said Monday its board had hired Goldman Sachs Group Inc. to assist with a "review of a wide range of strategic and financial alternatives." The process could result in a sale or other changes, such as speeding the shift of company-owned locations to franchisees, GNC said.

Shares rose 6.7% to $25.99 shortly after 2 p.m. EDT Monday. GNC shares, down 40% in the past 12 months, had their worst single-day stock performance last Thursday after the company reported declining same-store sales in the first quarter and lowered its earnings targets for 2016. The Pittsburgh-based company said it was forced to deeply discount vitamins because it had a glut of inventory nearing expiration on its shelves.

Chief Executive Michael Archbold said last week that the quarterly results were "unacceptable" and the turnaround's progress "insufficient." Among the hiccups, Mr. Archbold said, were missed targets in transitioning the retailer's vitamin sales model from "so-called gender-based selling" to what it called "solutions-based selling," adding that GNC is continuing to train associates and promote new products.

Executives also said the retailer's e-commerce business was lagging, with sales for the first quarter down 7.5% as traffic fell 21%. The company said it sees a lower penetration rate of its online sales to brick-and-mortar business than other areas of retail. GNC's massive store fleet, the majority of which is franchised, vastly outnumbers those of other specialty retailers. In North America, GNC owns and operates roughly six times as many stores as competitor Vitamin Shoppe, according to recent filings.

Mr. Archbold is nearly two years into his tenure as CEO. He joined the company after leading women's clothing company Talbots Inc. and previously was president and chief financial officer of Vitamin Shoppe. He has replaced much of GNC's leadership and focused on pulling back on unprofitable promotions. He wasn't quoted in Monday's news release.

"We are in the early stages of a broad review and will take the time we need to thoroughly evaluate our opportunities to achieve the best result for our shareholders, business partners, and associates," GNC Chairman Michael Hines said.

Meanwhile, the growth of the market for vitamins and dietary supplements has slowed in recent years. North American sales for such products hit $27 billion in 2015, up 4% from the year before, but slower than the historic compound annual growth rate of 4.7%, according to Euromonitor International.

Last year, GNC's sales rose 1% to $2.64 billion last year, after falling the year before. About three-quarters of its sales come from its retail operations, with the remainder divided between revenue from franchises and that from its manufacturing and wholesale business. The company makes most of its branded products.

Write to Sara Germano at sara.germano@wsj.com and Austen Hufford at austen.hufford@wsj.com

(END) Dow Jones Newswires

May 02, 2016 14:45 ET (18:45 GMT)

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