GNC Holdings Thursday said it will sell and refranchise 84 of its stores to one of its franchisees, Sun Holdings, a move that will garner some $17 million. The supplements retailer said it aims to sell a total of 200 company-owned stores this year and another 1,000 in total over the next several years.
GNC also said that Q1 same store sales fell 2.6% in domestic company-owned stores, including web sales, and dropped 5.6% across franchise-owned stores.
GNC CEO Michael Archbold noted in a press release that sales were hit by the company’s need to heavily discount supplements to get them off the shelves before they expired—something that Bloomberg called a metaphor for the industry.
With little convincing science behind the effects or benefits of many supplements—indeed, with some research saying that, for already healthy people, they do little—much of their appeal is based on largely untested claims, a situation that prompted a New York Times headline to once blare, "Don't take your vitamins."
Worse, there's increasing worry that they could actually do harm. Last year New York Attorney General Eric Schneiderman sent cease-and-desist letters to GNC and other retailers over what he called inaccurate labeling and quality issues. GNC worked out a settlement with his office in March.
But belief in the benefits of supplements is easily shaken if people think they’re buying inert, allergenic or potentially harmful substances, as Schneiderman's office claimed. In any case, consumers have been buying fewer supplements. That mess has been compounded by a cut to GNC’s marketing budget, which CEO Archbold said has been refocused.
“We are not pleased with the reported results for the quarter and find them unacceptable,” he said in a statement. “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."
GNC has about 9,000 locations nationwide, with about 2,000 of those locations within Rite Aid stores. Speaking on GNC's first-quarter conference call Thursday morning, Archbold told analysts the company is seeing strong interest in divestiture from both new franchisees and existing partners, the Pittsburgh Business Times reports.
GNC CFO Tricia Tolivar said the company has 17 letters of intent to sell additional company-owned stores during the second quarter. "Many of those are existing franchisees," Tolivar said.