GNC Rises After Upgrade, Vitamin Shoppe Seen as Potential Partner

NEW YORK (TheStreet) -- Shares of health and wellness product retailer GNC Holdings (GNC) are rising in early trading after analysts at Credit Suisse upgraded the stock. Additionally, the research firm said it remains "intrigued" about the potential for a merger between the company and its peer Vitamin Shoppe (VSI).

WHAT'S NEW: In a note to investors this morning, Credit Suisse analysts Gary Balter and Andrew Kinder increased their rating on GNC shares to Outperform from Neutral, citing confidence in the company's CEO, Michael Archbold, and the stock's recent underperformance following earnings misses in its last three consecutive quarters. The analysts contend that GNC has a loyal customer base and that some changes to its cost base, store count and franchise terms could lead it to better results. Credit Suisse maintained its $43 price target on shares of GNC.

WHAT'S NOTABLE: The analysts also stated that they "remain intrigued" by the potential for a merger between GNC and its rival Vitamin Shoppe. The two companies have a high degree of store overlap and Vitamin Shoppe would get the sports nutrition and manufacturing operations that it is "currently chasing through dilutive investments" by combining with GNC, the analysts wrote. The research note also pointed out that Archbold, who was appointed GNC's CEO just last week, previously served as the Chief Operating Officer and as the Chief Financial Officer of Vitamin Shoppe and that he has a "rich history with private equity funds."

PRICE ACTION: Shares of GNC Holdings rose $1.31, or 4.01%, to $33.98 in mid-morning trading, while Vitamin Shoppe gained $1.06, or 2.82%, to $38.61.

Reporting by Jason Keil.

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