GNC General Nutrition Center Selling 40% Of shares to CHINA, to help pay $1 Billion debt. 200 Stores to be closed

[h=1]Private label important GNC growth driver[/h]GNC revenue has declined as the company changes it strategies and seeks a new majority partner. Yet its focus on innovating private label brands seems to be working. <iframe id="google_ads_iframe_/3834/nh360.home/article/news_6" title="3rd party ad content" name="google_ads_iframe_/3834/nh360.home/article/news_6" width="300" height="250" scrolling="no" marginwidth="0" marginheight="0" frameborder="0" style="font-size: 1rem; color: rgb(0, 0, 0); -webkit-text-size-adjust: 100%; box-sizing: inherit; border-width: 0px; vertical-align: bottom;"></iframe>




The sale of LuckyVitamin and ending of the Gold Card customer promotion program hit GNC's first-quarter revenue numbers as the supplement company reached $607.5 million in 2018, compared with $654.9 million in the first quarter of 2017.
The Lucky Vitamin sale on Sept. 30 resulted in a $22.7 million revenue reduction, while the pricing promo change showed a $23 million decrease, the company reported via press release.
Related: Top takeaways on the 2017 global supplements market
Leaders on the first-quarter earnings call, however, touted a return to same-store sales increases, with this quarter marking the third consecutive in positive territory. Same store sales increased 0.5 percent in domestic company-owned stores (including GNC.com) in the first quarter. Yet decreases reached 1.9 percent at domestic franchise locations. As of  March 31, GNC had 3,385 corporate stores in the U.S. and Canada, 1,083 domestic franchise locations, 2,428 Rite Aid franchise store-within-a-store locations and 2,009 international locations.
"During the first quarter of 2018, we continued to see the business improve, and were pleased with the progress of our strategic growth initiatives," CEO Ken Martindale said via press release. "Notably, we delivered meaningful gross margin growth, driven primarily by increased penetration of our private label brands. We continue to work to leverage our strength in innovation, expand our international presence and deliver a consistent, compelling experience at every customer touch point."

Private label sales reached 50 percent of total sales, compared with 43 percent in Q1 2017. A key driver was the launch of Slimvance, a GNC branded weight loss product, Martindale said, which attracted new customers and drove larger basket sizes. The company also recently relaunched its AMP sports performance line with new packaging and products and continues to promote its Beyond Raw brand. The company's focus on innovation and quality, and how it communicates benefits to customers are key to success, noted Tricia Tolivar, chief financial officer and executive vice president.





Additional first-quarter highlights include:

• Net income of $6.2 million compared with $24.7 million in the prior year quarter.
• Diluted earnings per share was 7 cents in the current quarter compared with 36 cents in the prior year quarter. 
• The company recorded a $16.7 million loss on debt refinancing. Excluding this item and other expenses, adjusted net income was $20.1 million in the current quarter compared with $26 million in the prior year quarter, and adjusted EPS was 24 cents in the current quarter compared with 38 cents in the prior year quarter. 
• Adjusted EBITDA, as defined and reconciled, was $59.3 million in the current quarter compared with $73.7 million in the prior year quarter. The prior year quarter includes the impact of $23 million in revenue and gross profit associated with the termination of the Gold Card Member Pricing program, as well as higher marketing expense of approximately $6 million in connection with the launch of the media campaign around the One New GNC.

Meanwhile, GNC's proposed $300 million joint venture with China's Harbin Pharmaceutical Group Holding Co. suffered a delay this week when GNC didn’t get a quorum for its stockholder meeting. More than 92 percent of proxies received authorized a vote in favor issuing convertible preferred shares that would give Harbin a 40 percent stake in the company. The next vote takes place May 9.

It’s been a busy 12 months at GNC, the near-$300 million health and wellness retailer with world headquarters at Sixth and Wood, Downtown.
The 18-month-old One New GNC marketing strategy gained some footing in the past year and new CEO Ken Martindale came on board in September. In addition, the company is partnering with China’s second largest drug maker and has reached a master franchise agreement with its Australian counterpart to sell GNC products down under.
The marketing strategy brought simplified pricing and a new loyalty program to strengthen GNC’s customer base.

The ventures in China and Australia are about strengthening the company’s balance sheet.
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Steve Twedt
GNC stockholders finally give go-ahead for partnership with Chinese pharmaceutical firm Mr. Martindale said much of the $300 million investment from GNC’s new Chinese partner, Harbin Pharmaceutical Group Co. Ltd., will go toward paying down a $1.38 billion debt load that has been weighing down its books.
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Earlier this year, GNC was able to push back the March 2019 due date on a $1.1 billion loan to 2021, giving the company some breathing room. But attempts to refinance its debt were met with terms so unfavorable that the company decided not to proceed.
“Clearly the amount of debt has been a little bit challenging,” Mr. Martindale acknowledged.

Ravindranath Madhavan, a professor of business administration and director of the International Business Center at the University of Pittsburgh’s Joseph M. Katz Graduate School of Business, says the Harbin joint venture should buy GNC some time.
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“The key is going to be whether this investment will sort of fix some problems and allow the management team to focus on what they need to do,” he said. He specifically mentioned the retailer’s need to fine tune its franchising model.
“GNC is really struggling with its core market. So even as the Chinese are good for GNC, I’m not sure it is going to pull it out of the decline that it’s been in.”
Initially at least, Mr. Madhavan sees Harbin benefiting more from the partnership.

Steve Twedt
GNC profits down; retailer plans to close 200 stores
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“There is a lot of growth in the Chinese pharmaceutical space and related health care spending and, for Harbin, the strength of the GNC brand and its capacity for marketing will be very, very useful.”
Gaining access to the Chinese market promises a financial boon for GNC “but at the same time they are providing Harbin with a great deal of ideas about how to open up these kinds of markets,” Mr. Madhavan said. “They have a lot of know-how about how to segment a market, about how you position a product.”
Under the agreement, which still must receive regulatory approval, Harbin gets to pick five of the 11 GNC directors, two of whom will be independent. Mr. Martindale describes himself as “actually very bullish” about the expanded board, which he believes will bring additional experience and brain power.
Last Friday, S&P Global Ratings said it would maintain GNC’s CCC+ rating with negative implications. The S&P website says a CCC rating means there is a vulnerability to nonpayment “in the event of adverse business, financial, or economic conditions.”
Mr. Martindale has heard similar forecasts and worse for his company, including those who opine that GNC can’t compete anymore or that it has too many brick-and-mortar stores (GNC has said it plans to close 200 stores this year) .
“Obviously I feel that they are wrong. I feel we have a tremendous opportunity,” he said in an interview following last week’s vote in favor of the Harbin partnership.
“I’m not one of the believers that specialty retail is going away.”
GNC shares have continued to languish, losing nearly half their value from 12 months ago. After flirting with $11 a share last July, GNC stock has traded below $4 nearly the entire spring.
Through the company’s agreement to issue just under 300,000 new shares to Harbin under the deal, giving it a 40 percent stake in the company, current stockholders will now see some dilution in their shares as well.
Still, the Harbin partnership “is the right thing to do,” Mr. Martindale said, and GNC shareholders apparently agree:
More than 94 percent of votes cast last week favored the Harbin deal

That's a helluva hit!!

Brick and mortar stores died years ago! In my humble opinion Supplements arent something you need to try on for size, or feel tangibly like clothes, so im surprised their Brick and Mortar stores haven't already disappeared.

I also seen Bodybuilding.com was selling their main office /warehouse for 15.9 million i think i read.

Back to G.N.C. - So they CURRENTLY OWE $1,380,000,000.00 in total Debt, of which $1.1 BILLION DOLLARS was due in March 2019, however GNC was able to get an extension on the payement pushing it back to the year 2021.

I suppose the extension on paying back 1.1 BILLION DOLLARS was granted due to their near deal in Selling 40% of shares in GNC to China for $300,000,000.00 (300 million dollars) , So what am i missing here? Doesnt add up!

I wish my credit card and auto loans were so forgiving!



QUESTION????

Does China have a lot of American Investment in their Companies like this as well? Do we swoop in and buy majority shares in struggling big brand chinese companies?? You would think so given the Growth rate of their population, but all I ever hear and read about is how some Chinese Group / Company Bought Up American Company Shares etc...


Anyhow, I thought the story was worth noting as GNC was a kick ass store when it first opened up, and where a lot of us older guys bought all our supplements from. If you had a buddy that worked there, you knew that GNC would remove any expired sell date products and your buddy would get to take them home free, or sell them to you cheap as hell!

Then GNC changed from the guy and girl who worked there and actually looked like they knew what they were talking about and practiced what they preach and sell, to your every day Joe & Jane. Fat no problem, Stoner...no problem, Maralyn Manson freak why not and , punk rocker skin head or Snoop dog red eyed blasted brother , i have seen every one of those types work at a GNC! I suppose after you gain some traction, and become a trusted company, you neednt worry about hiring employees that know what theyre talking about in health an wellness let alone look the part, and i guess at that point you can just hire cashiers regardless of appearance or knowledge of store products. Then they will badger you for the sale, and repeatedly ask "let me know if you need any help" so then you finally do ask the sales person for help or ask about this or that product, and what do they do? Well they walk over to the product, pick it up, spin it around and begin reading either aloud or to themseleves the ingredients that you could have and likely aready have read for yourself. They then look you in the eye and regurgitate as best they can remember what they just read off the label. lol,


Sorry bit of a rant lol, as GNC was pretty kick ass in the very beginning.

I have to say brick and mortar supplement / nutrition stores all suck these days! The chains anyhow, some one-off privately owned supplement stores are pretty awesome, owned and operated by practicing preachers and teachers of all things health, nutrition and training related. The kind of place Where you might run in for a quick bottle of creatine and wind up there for over and hour because you got talking to the owner or whomever was working there about this or that related to the product, or training in general.

That sort of stuff matters to most, i know it does to me!

Example, If I was giving you advice on pre contest prep or anything bodybuilding realted, you would at least like to think i have gone through it myself correct? Im not saying you have to look huge or anythng like that, but you wouldnt listen to me or my advice if you knew i never competed, and in fact really didnt have too much interest in bodybuilding and was just here answering questions because i was getting paid minimum wage, ergo GNC's Decline!