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Social media push, discounting to drive GNC in 2013, CEO says

By Hank Schultz , 14-Feb-2013

GNC is pushing strongly ahead with a social media marketing campaign to further expand its “unique customer base” said CEO Joe Fortunato in the company’s fourth quarter earnings call. 

The new campaign, called “Me on GNC” will encourage consumers to share their success stories with using the company’s products in various online forums.

“What I love about demographics is that we are geared toward younger consumers,” Fortunato said. “But 22% of demographic are baby boomers, but they are the more sophisticated, intense, lifestyle baby boomers.  They are still running races, they are still working out on a regular basis.  They are the lifestyle consumers. Our goal is not just to go after the younger consumers who can be consumers for life, but we want to reach all consumers, young or old, with the message that you need to take care of yourself.”

The new campaign will use a variety of mediums, Fortunato said, including Facebook, Twitter and the supplement retailer's own website.  It will also include man-on-the-street and in-store videos.

The new viral campaign goes hand-in-hand with a more traditional advertising campaign dubbed “Respect Yourself” conveying the healthy lifestyle message.

Nationwide discounting

A third marketing initiative that Fortunato touched upon during the call was the company’s ongoing revamp of its Gold Card program.  Previously shoppers who signed up for one of the cards could get in-store discounts in the first week of the month. Over the past year, GNC has been experimenting in several markets with a program that allows ongoing discounts, and has reported positive results.  The plan, Fortunato said, is to roll out the all-day, every-day discount program nationwide later in the year.  The program does depress prices overall at the register somewhat, especially in its initial phases.  But Fortunato said the increase in transactions makes it well worth the cost.

“There are always periods of time when you have to invest in the business to drive the business and value to shareholders for the long term,” he said. “For the long term we will build this business for a home run year in 2014.”

Strong performance

From a raw numbers standpoint, GNC turned in another impressive performance. For the fourth quarter, GNC reported consolidated revenue of $565 million, a 10.9% increase over the $509.6 million reported in 2011 Q4.  Revenue increased in the Company's retail and franchise segments both by 12.7%.  Manufacturing/wholesale segment revenue decline by 2.4% due to an approximately $5 million reduction in third-party contract manufacturing sales. Fortuanto said this could be attributed to having to devote capacity to rapidly produce new products to comply with new regulations in Mexico and South Korea.

Same store sales increased 7.1% in domestic company-owned stores (including GNC.com sales), representing the Company's 30th consecutive quarter of positive same store sales growth. GNC estimated that Hurricance Sandy dealt a $4 million hit to the company’s revenue.

The whole year performance came in as follows: In  2012, GNC reported consolidated revenue of $2.4 billion, an increase of 17.3% over the $2.1 billion it reported in 2011. Segment revenue was up 17.6% in retail, 21.9% in franchise outlets, and manufacturing/wholesale was up by 8.2%.  Same store sales increased 11.5% in domestic company-owned stores (including GNC.com sales).  In domestic franchise locations, same store sales increased 15.0%.

For the year ahead, GNC forecasts revenue growth of 9% to 10%, and consolidated earnings per diluted share of $2.75 to $2.80.  The company also expects to open 150 more new stores and 30 new franchise locations in the US, 175 to 200 new international franchise locations and 30 new GNC-Rite Aide store-within-a-store locations.

New products pipeline

One feature of GNC’s strategy remains the same, and that is the rapid pace of new product launches.  Fortunato said the company introduced 77 new products in 2012, compared to about 50 new product launches in previous years, and the company continues to push the pace of introductions.

“The pipeline is full. You want to make sure that you don’t push the launches too close to each other or you don’t derive the full benefit of these launches you worked so hard on,” Fortunato said. “We have quite a few more launches in February, March and April.  And then it will slow down some.

“Sometimes it takes a couple of years for these products to mature.  It’s more of an art than a science to introduce these products, but I think we are very good at it,” he said.

“I think we understand our consumer base better than anybody in the world and how our consumers react to our new product launches shows that,” Fortunato said.

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