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 9,000 stores, consisting of almost 4,000 company-owned stores in the US, Canada, and Puerto Rico, followed by 3,169 franchised stores in about 50 countries, and 2,372 store-within-a-store sites in Rite Aid locations. Fast-growing GNC Holdings was founded as a health food store in Pittsburgh in 1935.
GNC rings up 94% of its sales in the US. Currently, GNC does business in about 50 other countries. Mexico, South Korea, and Chile are home to nearly half of the GNC's approximately 2,085 international franchise stores. GNC has more than 188 company-owned stores in Canada.
While sales at company-owned and franchised GNC stores account for 91% of sales, GNC also operates a growing manufacturing/wholesale business (9% of 2014 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 advertising costs of $64.3 million in 2015 down from $70.5 million in advertising in 2014, and up from $67.2 million in 2013 and $62.3 million in 2012.
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. It also sells via its website.
In fiscal 2015 GNC's net revenues increased by 1% due to an increase in franchise segment.
Revenues from the Franchise segment rose primarily due to increased third-party wholesale product sales. Revenue from retail segment remained flat.
Revenues from Manufacturing/Wholesale segment decreased. Sales from Third-party contract manufacturing from South Carolina manufacturing plant decreased. Wholesale revenue was relatively flat.
GNC's 2015 net income decreased by 14% due to the presence of discount supplements related to goodwill, trade name, and website intangible assets and related to fixed assets.
Cash from operating activities grew by 17% due to changes in inventory and accounts payable.
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.
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 company expects to continue capitalizing on international revenue growth opportunities through additions of franchise stores in existing markets, expansion into new high growth markets and the growth of product distribution in both existing and new markets.
In 2016 it planned to continue to executing its refranchising strategy, targeting a balanced portfolio by increasing stores by focusing on creating and nurturing franchise partnerships that support brand image. It also plans to continue capitalizing on international revenue growth opportunities through the addition of franchise stores in existing markets, expansion into new high growth markets and the growth of product distribution in both existing and new markets. It will also implement a revised pricing strategy.
Partnerships have also been important to GNC's growth strategy.
In 2015 American Media, Inc and GNC signed an exclusive, multi-year ecommerce partnership on Shape, Men's Fitness, Fit Pregnancy, Natural Health, Muscle & Fitness, Flex, and Muscle & Fitness Hers websites. The "Shop GNC" stores offer a selection of GNC products curated by the editors at the brands in addition to access to the full GNC.com assortment
In 2013, GNC expanded its retail presence in China by opening the first stand-alone GNC store in Shanghai. The move complements GNC's existing marketing footprint in the world's largest consumer market. GNC planned on opening an additional 24 locations in China in 2014/15.