GNC to Close Up to 900 Stores by End of 2020; Retail Analyst Offers Insight

by Alex Tostado

Pittsburgh — The vitamin and health supplement niche of the brick-and-mortar retail market continues to experience intense competitive pressure, observes veteran retail consultant Jeff Green. So it came as no surprise to Green when GNC Holdings Inc. (NYSE: GNC) officials revealed in a second-quarter earnings call earlier this week that it will shutter up to 900 stores in North America by the end of 2020.

“It used to be that specialty health supplements were only found in specialty stores such as GNC, Vitamin Shoppe and other regional chains,” says Green, a partner at Phoenix-based Hoffman Strategy Group. “Now you can find the same products sold at traditional supermarkets, specialty food stores and discount department stores.”

Citing a decrease in mall traffic over time, Tricia Tolivar, CFO of Pittsburgh-based GNC, said during the earnings call Monday that the company could close up to 500 of its 800 stores that are currently located in malls across the United States and Canada.

Ken Martindale, CEO of GNC, added that 28 percent of the company’s stores are situated in malls, while 61 percent are in strip centers.

“The negative trends in traffic that we’ve seen in mall stores over the past several years have accelerated during the past few quarters,” said Martindale. “Our strip center locations are relatively stable from a comparable sales perspective.”

As of June 30, GNC had about 8,000 locations worldwide, of which approximately 5,900 were retail stores in the United States (including an estimated 2,000 Rite Aid licensed store-within-a-store locations).

The company reported that its consolidated revenue in the second quarter of 2019 was $534 million, down from $617.9 million in the second quarter of 2018. Domestic same store sales decreased 4.6 percent during the same period.

E-commerce sales comprised 8.1 percent of U.S. and Canada revenue for the three months that ended June 30, 2019 compared with 8.3 percent in the same period a year ago.

Green says the store closures are a sure sign GNC will focus on e-commerce.

“GNC will now put its resources to increasing online sales,” says Green. “GNC needs to shed the more expensive mall locations, which have been dragging down the overall brick-and-mortar sales for the company.”

GNC’s stock price closed on Wednesday at $1.83 per share, down from $3.23 per share one year ago.

— Alex Tostado

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