GNC Remains Committed To Growth
At a time when many retailers are slashing jobs and closing locations, Pittsburgh-based General Nutrition Centers (GNC) remains focused on expansion. With some 3,615 U.S. locations and 6,200 stores worldwide (including about 1,000 franchise and 1,250 store-within-a-store locations in Rite Aid, and franchise operations in 52 international markets), GNC is the largest specialty retailer of nutritional supplements in the world. It has produced positive sales growth in both franchise and corporate stores in 2008 and has positioned itself to grow even further.
For its third quarter ended Sept. 30, 2008, the company reported revenues of $414.2 million, a 4.8% increase over the same quarter in 2007, while same-store sales improved 1.5% in domestic company-owned stores. Revenue for the first nine months of 2008 was $1.2 billion, a 7.5% increase over the same period in 2007 (at presstime, it had not yet released its fourth-quarter and fiscal 2008 earnings).
“GNC is continuing to do very well, opening 237 stores (in North America alone) within the last three years and many more planned to open this year,” said Tom Dowd, executive VP of stores, operations and development.
To further expand its market share, the company is looking to tap into the pool of retail professionals who have found themselves displaced by the economic recession.
“We are hoping to grow with potential new partners who have retail experience,” Dowd added.
Dowd, who joined the company 20 years ago, began at GNC as a regional sales director in the New York and New Jersey markets. Prior to his current role, he served as general manager, senior VP of stores. Chain Store Age Associate editor/Web editor Samantha Murphy spoke with Dowd about GNC’s expansion strategies.
How has the economy affected business at GNC?
It is a hard time in retail right now, but we continue to do well by building on last year’s fantastic results.
How many locations did you open in 2008?
We opened 95 locations in 2008, including 69 corporate and 29 franchise stores. Our strategy for store growth was to stay firm in our expansion policies and standards while maintaining our market share within each market without over-expanding.
There have been many learning opportunities with expansion from the past at GNC, and we can’t ignore what’s going on around the industry with other companies that have over-expanded, such as Starbucks. We have a rigorous process that involves a field team, and we look at each new deal with a critical eye from all angles.
What are GNC’s expansion plans for 2009?
We have a moving target based on how the year shakes out that depends on the challenges we all face with the economy. I don’t think anyone knows what the retail landscape will look like this time next year; all we can hope for is that we are at the tail end of this downturn.
Housing plans have slowed and so has development. This means that centers that went up waiting for housing to grow around them will have to wait much longer to be profitable. In response, we have passed on opening in certain markets to see how growth proceeds. We have also passed on some good real estate because of rent factors, but we are starting to look at them again as rents start to normalize. Overall, we are looking to open 50 to 100-plus stores in 2009.
Tell us more about GNC’s plans to target displaced retail professionals to open a franchise.
In 2008, 2.5 million jobs were lost in the U.S. and, currently, the unemployment rate has surged above 7%. It is estimated that in 2009, 14,000 retailers will close their doors, displacing thousands of additional employees from their jobs. We recognize that there is a new supply of retail talent looking for new and more entrepreneurial opportunities in 2009, and we are offering them 25% off the initial franchise fee to open a location.
What has the response been so far?
So far, we have received a lot of positive feedback from interested retail professionals, along with many calls, Web traffic and e-mails. We just put this offer out recently, but I know it’s going to result in getting some great retailers into our system.
Can you describe the current GNC prototype?
Since our inception 75 years ago, GNC has worked hard to create great-looking stores. A standard GNC store is about 1,400 sq. ft., with sports supplements in the back half of each store and vitamin/diet/herb sections in the front half.
How is the supplement business doing right now?
The supplement and self-care industry remains a $21 billion segment and continues to grow at a rate of 4% to 6% each year. Annual growth in the supplement industry is also expected to rise steadily through 2012. Overall, this is a strong business segment, and GNC has the right business model and retail footprint to take advantage of the growing nutrition category.
We believe the category will continue to grow as people become older, work out more, and want to become more knowledgeable about supplements and nutrition to better improve their quality of life.
GNC has done well by the baby-boomers over the years.
How do they figure into your plans moving forward?
We are targeting all growth areas and working hard to react to strong categories, and the baby-boomer segment is certainly one of them. As the boomers continue to age, their main concern is health-care costs and living well. Life expectancy has also increased 30 years in the last century, and boomers account for $1.5 trillion spent on goods and services, with two times the disposable income of any other age group.
As this segment becomes more conscious of health conditions in general, they become more proactive in preventive care. We definitely have plans to look at targeting baby boomers more in the future.