Natural Foods Merchandiser
Supplement coalition key to GNC's 2016 business strategy

Supplement coalition key to GNC's 2016 business strategy

GNC includes fixing the supplement industry as a part its 2016 retail growth strategy.

Supplement sales had a -1 percent impact on same-store sales in 2015 that likely will continue this year, CEO Mike Archbold said during the company’s first-quarter/year-end earnings call Feb. 11.

“We are being realistic and are planning that vitamins will have a negative impact on the total company comp in 2016,” he said.

Same store sales increased 0.8 percent in domestic company-owned stores (including GNC.com sales) in the fourth quarter of 2015. At domestic franchise locations, sales decreased 3.2 percent.

GNC was the object of the New York Attorney General’s investigation into herbal supplements last year. But even before that, the company had laid out a “strategic evolution” plan to remake the store into a natural living hub as it moved from “gender-based sales to solutions-based” and drive relationship over discount drivers.

The company will continue to work on the plan but focus on four areas in 2016:

  • Refranchising to convert company-owned stores to franchisees.
  • Pricing to remove confusion and focus on key categories.
  • Customer loyalty and the Gold Card to understand customers and remove discount card perception.
  • Leading an industry supplements coalition.

“Questions regarding the quality, purity, potency, safety or efficacy of dietary supplements can have a material effect on our reputation, the demand for our products, our ability to generate revenues, and the value of our stock,” Archbold said. “Over the past 12 months, we and others in the industry, particularly specialty retail, have experienced volatility in sales and stock performance as a result of such publicity, including unfounded and meritless allegations.”

The GNC-led coalition gathers more than 40 companies that include retailers, raw material suppliers, manufacturers, multilevel marketers, practitioners and pharma.

The coalition has formed four working groups:

  • Media strategy to improve consumer confidence, answer government regulators and answer media.
  • Quality seals and facilities certification group to establish standards thresholds, facilities certification, and raw material and finished product quality seals.
  • Raw materials GMP group to establish raw material cGMPs, traceability standards and testing requirements.
  • Industry product notification database and numbering codes to review and recommend on the advisability of an industry database and the mechanics of an industry notification and numbering system.

“While we know the lengths we go to to ensure our customers receive the best product, these attacks can undermine consumer confidence,” Archbold said. “It’s critical that we highlight our rigorous quality standards and change the perception of the quality players in the industry.”

Fourth-quarter highlights for GNC include:

  • Consolidated revenue increased 1.8 percent to $618.2 million compared with $607.2 million for the fourth quarter of 2014. 
  • Revenue, excluding intersegment sales, increased in the retail and manufacturing/wholesale segments by 1.8 percent and 7.2 percent, respectively. 
  • Revenue decreased in the franchise segment by 1 percent.
  • Same-store sales increased 0.8 percent in domestic company-owned stores (including GNC.com sales) in the fourth quarter of 2015. At domestic franchise locations, sales decreased 3.2 percent.
  • Adjusted net income was $49.9 million, a decrease of 7.6 percent as compared with adjusted net income of $53.9 million for the fourth quarter of 2014.

Year-end result highlights include:

  • Consolidated revenue of $2.64 billion, an increase of 1 percent. 
  • Revenue increased in retail and franchise segments by 0.3 percent and 5.9 percent, respectively. Revenue, excluding intersegment sales, decreased in the manufacturing/wholesale segment by 2.3 percent.
  • Adjusted net income for full year 2015 was $246.5 million, a decrease of 5.7 percent as compared with adjusted net income of $261.3 million for the full year 2014. 
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