What's good for the GNC customer is great for the company's bottom line. GNC Holdings operates the world's leading nutritional-supplements retail chain devoted to items such as vitamins, supplements, minerals, and dietary products. The firm manufactures private-label products for Rite Aid, Sam's Club, and PetSmart and drugstore.com. Altogether, GNC boasts more than 8,500 stores, consisting of some 3,350 company-owned stores in the US, Canada, and Puerto Rico, followed by 3,035 franchised stores in 50-plus countries, and 2,215 store-within-a-store sites in Rite Aid locations. Founded as a health food store in Pittsburgh in 1935, fast-growing GNC Holdings went public in 2011.
GNC Holdings went public in April 2011 with an offering worth $360 million. The selling shareholders -- Ontario Teachers' Pension Plan and Ares Management -- acquired GNC four years earlier from Apollo Global Management, which twice tried and failed to take the chain public. GNC was one of 2011's top performing IPOs, with its stock price up 118% through March 2012.
GNC rings up 95% of its sales in the US. Currently, GNC does business in about 55 foreign countries. Mexico, South Korea, and Chile are home to nearly half of the GNC's approximately 1,830 international franchise stores. GNC has more than 165 company-owned stores in Canada.
While sales at company-owned and franchised GNC stores account for 90% of sales, GNC also operates a growing manufacturing/wholesale business (10% of 2013 sales). The company's manufacturing plants are located in Greenville and Anderson, South Carolina, where it makes products for its own stores and for other retailers, including its longtime partner Rite Aid, as well as Sam's Club and PetSmart. (GNC produces a line of GNC-branded pet supplements for the pet supplies retailer.) GNC supplies Rite Aid with vitamins under the PharmAssure brand, as well as a number of Rite Aid private-label supplements.
Sales and Marketing
GNC has devoted more dollars to advertising expenses in recent years. The supplements retailer logged $67.2 million in advertising in 2013, up from $62.3 million in 2012 and $52.9 million in 2011.
The retailer has worked hard to shed its "muscle head" image by redesigning all of its US stores to attract more women and seniors and to increase its share of the nutritional supplement market.
In its second full year as a public company, GNC saw its sales increase some 8% to $2.63 billion vs. 2012's $2.43 billion, while net income increased 10% over the same period. All three business segments posted increases: franchise (up 8%), retail (up 8%), and manufacturing (up 11%). The addition of new stores and increases in same-store sales at existing locations are also fueling GNC's gains in sales and profits. Additionally, GNC's cash flow from operations inched up $16.9 million in 2013 to $238.1 million as compared to $221.2 million in 2012. The vitamins retailer attributes the boost from a $24.8 million increase in net income in 2013 and a $69.6 million increase in inventory, thanks to a rise in finished good to support GNC's sales increases.
GNC's growth strategy involves boosting its company-owned domestic retail earnings and square footage while increasing its international presence in the UK, Scandinavia, and the rest of Europe. It's also expanding its e-commerce business -- one of the fastest growing sales channels for nutritional supplements -- and continues to leverage the GNC brand through new partnerships.
The vitamin and supplement seller is banking on being well-positioned to capitalize on the favorable industry trends, such as the aging US population and consumers' interest in maintaining and improving health. GNC points to its iconic brand and top position (in number of stores and global reach) as the specialty retailer of health and wellness products as its primary competitive strengths. The supplements peddler also cites its recent website redesign, capital investment, and entry into partnerships as ways it plans to strong-arm its competition.
Partnerships have also been important to GNC's growth strategy. GNC and PepsiCo formed a joint venture to develop and sell fortified coconut water products under the newly-created Phenom brand. (The products debuted in GNC stores in 2011.) Also, Rite Aid has extended its previous agreement to build GNC Live Well stores-within-a-store. As part of the extension, GNC is creating 1,125 more stores in Rite Aid locations nationwide by the end of 2014.
Mergers and Acquisitions
In 2013 GNC acquired A1 Sports Ltd. (dba Discount Supplements), a multi-brand sports nutrition online retailer in the UK.