Retail

GNC's Big Store Selloff

It would appear that consumers' lack of faith in supplements to get them pumped up is causing GNC to scale down.

In a statement released last week, GNC announced that it plans to sell off 1,000 of its locations, beginning with 200 this year.

It's a plan, the release notes, built out from the supplement retailer's agreement with Sun Holdings to refranchise 84 of its stores to the latter company, for $17 million.

"We are very pleased to announce the completion of this refranchising agreement, which is part of our strategic plan to transition approximately 200 company-owned store locations to an asset-light franchise model this year and 1,000 company-owned store locations over the next three to four years," stated Mike Archbold, CEO of GNC, in the press release.

What Archbold is not pleased with, on the other hand, is the earnings reality that has led to the Sun Holdings deal (and subsequent 1,000-store selloff over time). In Q1 of this year, same-store sales for GNC fell 2.6 percent in the U.S. and even further — 5.6 percent — in the case of franchise-owned stores.

Elsewhere in his statement, Archbold remarked: "While we are making progress on our strategic evolution, which we started in 2014, the turnaround is taking longer than expected, and the progress is insufficient. Our number one priority is our vitamin business and the steps we need to take to grow same-store sales in this category through new promotions and a renewed marketing focus. In addition, we are reducing the significance of aged inventory, optimizing our assortment and training store associates to emphasize the vitamin solution to our customers."

Retail Dive posits that a large factor that might have contributed to GNC's big selloff is a perception among consumers — backed up by an increasing amount of research — that the alleged benefits of the supplements on which the retail chain has built its business are not legitimate. In some cases, notes the outlet, supplements might even be harmful.

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