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 8,900 stores, consisting of almost 3,500 company-owned stores in the US, Canada, and Puerto Rico, followed by 3,210 franchised stores in 50-plus countries, and 2,277 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 93% of its sales in the US. Currently, GNC does business in about 55 other countries. Mexico, South Korea, and Chile are home to nearly half of the GNC's approximately 2,140 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 $70.5 million in advertising in 2014, 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 2014 GNC's net sales decreased by 0.3% due to lower sales from the Franchise and Manufacturing/Wholesale segments, partially offset by increased sales from Retail.
Revenues in the Franchise segment decreased caused by lower international franchise revenues due to lower product sales, as the result of regulatory and macroeconomic factors in several key franchise markets.
Manufacturing/Wholesale segment revenues (which includes third-party sales from manufacturing facilities in South Carolina, as well as wholesale sales to Rite Aid, PetSmart, Sam's Club, and www.drugstore.com) decreased due to lower shipments to wholesale customers as the result of softer market trends.
Revenues in the Retail segment increased due to higher sales from e-commerce and the addition of 145 net new company-owned stores and the acquisition of 10 The Health Store in Ireland.
In 2014 GNC's net income declined by 3% due to decreased sales, increased other selling, general and administrative expenses, management realignment cost, the reversal of contingent purchase price, and other expenses. The company incurred $7.8 million associated with changes among its executive leadership team. It was also determined that certain conditions required to be met by the sellers in the purchase agreement of Discount Supplements and Lucky Vitamin were not achieved, and as such, it reversed a $4.4 million contingent purchase price liability.
Other expense, which includes the gain on sale of company-owned stores to franchisees and foreign currency loss, increased as a result of more sales of company-owned stores to franchisees in 2014.
In 2014 GNC's net cash provided by the operating activities increased by 27% due to a change in receivables, deferred revenues and other current liabilities and prepaids, and other current assets.
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.
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 25 locations in China in 2013/14.
Mergers and Acquisitions
In 2013 GNC acquired A1 Sports Ltd. (dba Discount Supplements), a multi-brand sports nutrition online retailer in the UK.