GNC looking for growth in 2004

Related tags Quarter Retailing Gnc

Sales and profits at leading supplement retailer GNC surged in the
fourth quarter after a flat performance in the prior months and
increased competition eroded the year's earnings.

The company, taken over by private investors during this period, said growth was due to significant increases in domestic same store sales and incremental sales growth from the company's manufacturing division.

But with yearly sales flat at $1.429 billion (up 0.3 per cent) and EBITDA for the year down 15 per cent to $156.9 million, it will need to sustain the fourth quarter's growth into 2004.

CEO Lou Mancini has promised to introduce more new products this year and will also close more than 100 of its underperforming stores by the end of April, in a bid to shake up the firm's performance. The company operates more than 5,000 retail outlets throughout the United States and in 29 foreign markets and is considered the world's largest specialty supplements retailer.

Acquired from the Netherlands-based Royal Numico for $750 million last year, GNC reported revenues of $343.7 million for the fourth quarter compared to $300.8 million for the same quarter of the prior year, an increase of 14.3 per cent. The quarter includes three weeks under the new owners, Apollo Management.

The rise was driven by significant increases in same store sales in both GNC's company-owned stores as well as franchised locations. Internationally, same store sales increased by 11.3 per cent in company-owned stores in Canada and by 6.9 per cent in international franchised stores.

Higher sales helped generate EBITDA of $33.4 million compared to $9.5 million for the comparable quarter of 2002. The earnings also benefited from lower advertising expenditures than the previous year's quarter, which had higher than normal advertising costs associated with promotion of the company's then recently completed store reset program.

"In the fourth quarter, our product categories continued to exhibit the strong momentum that began in the third quarter of 2003, with particular strength in the diet and sports nutrition categories,"​ said Mancini.

The company put the decline in 2003 EBITDA down to a new pricing strategy implemented in December 2002, increased competitive activity which resulted in lower gross margins, and the initiative to replace ephedra-related product sales with other diet and energy products.

An estimated $1.5 million has been budgeted on research into new products and six clinical trials are now under way.

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