Fox Broadcasting's decision to kick GNC out of the Super Bowl is still smarting at the vitamin and supplement seller, which reported first-quarter earnings on Tuesday that were on the decline.
GNC had been hoping for a sales boost with the big game spot. But for the quarter ended March 31, the Pittsburgh-based brand's same-store sales fell 3.9%. Revenue for the period was $644.8 million, a 3.6% drop from the year-earlier period, while net income was $23.9 million, roughly half of what it had been in the first quarter of 2016. Even so, analysts were impressed that the company beat expectations.
Larry Chiagouris, a marketing professor at Pace University's Lubin School of Business, believes that GNC's loss would have been less had the retailer been allowed to air its Super Bowl ad as originally planned. The ad, with a pricetag near $5 million, was the highlight of the 82-year-old's rebranding campaign to combat slowing sales amid online and grocery store competition. The turnaround effort also included a store redesign and revamped, more clear-cut loyalty program with better pricing all under the One New GNC platform.
Yet six days before the Feb. 5 game, the NFL rejected GNC's 30-second spot because GNC sells some products containing two of the 162 substances banned by the league. Fox Broadcasting Co. had already approved the spot. At the time, GNC said it was planning to pursue legal action against the broadcaster, but the current status of such plans are unclear.
"For brands that have large advertising budgets, such as Budweiser or Coke, missing an opportunity to appear on the Super Bowl is not that much a loss," said Chiagouris, noting that the game could have exposed GNC, which does not have such a budget, to a large audience quickly. "Given it was planning to use the Super Bowl to relaunch its brand, there is no question in my mind that the GNC business results would have been better than what it reported had it been provided an opportunity to advertise during the game," he said.
On a conference call to discuss the results, GNC's interim CEO Robert Moran agreed. "If you think about the Super Bowl, it's one of the classic viewing sites where we are advertising and watching commercials become an art," he said. "We missed out and had to go to
GNC, which has around 4,400 locations, was able to reallocate the dollars intended for the Super Bowl into other marketing, like the Oscars, which helped spread the rebranding effort and contributed to the better-than-expected first-quarter results. Investors, for one, were impressed. By early afternoon trading on Tuesday, GNC's share price was up a whopping 29% to $9.32.
The company plans to continue its quest for new consumers. Early results from an online store launched on Amazon.com in January have been positive, the company said. GNC, which spent roughly $11 million on measured media in the U.S. last year, according to Kantar Media, may move more dollars to online marketing in the back half of the year. The company has also taken its consumer data mining in-house after working with DunnhumbyUSA, which provides data analytics services for retailers, since 2013.
"We are encouraged and excited by the progress of the business -- our goal was to bring consumers back to GNC," said Moran. "It's clear that customers are coming back to our stores."