GNC scores home run with Total Lean as Q1 sales surge 23.4%

By Elaine Watson

- Last updated on GMT

Related tags Nutrition

GNC's proprietaryTotal Lean weight management products are a significant growth driver for the business
GNC's proprietaryTotal Lean weight management products are a significant growth driver for the business
Sales at supplements giant GNC surged 23.4% in the first quarter of 2012 driven by skyrocketing sales of Vitapak vitamin bundles, Total Lean weight management products and the Pro Performance AMP sports nutrition range.

Speaking to analysts this morning, GNC boss Joe Fortunato said: “We thought the diet business was going away from pills and we called the shot exactly right - that has been a home run for us.

“The Total Lean brand is dominant in the marketplace, it’s incredible, we have a hard time keeping up with demand.”

Sales from proprietary GNC brands account for almost 60% of revenues

GNC, which posted a 52.7% hike in adjusted pre-tax earnings to $125.1m in the three months to March 31, 2012, and a 23.4% rise in revenues to $624.3m, continues to “significantly outperform the market​”, with sales of proprietary brands such as Mega Men, Total Lean and Pro Performance now approaching 60% of sales.

He added: “The percentage of revenues from GNC proprietary brands continues to creep up - we’re now at 57-58% of sales, so we’re getting closer to 60% - and we may be able to go beyond 60%, which will increase our margins… We now own segments of the marketplace.”

However, GNC was also “the premier showcase for products from third party vendors”, ​he said.

“We see from the food, drug and mass market data that they are struggling in some areas, and then I look at our numbers and I know we have been taking market share from them in the past three quarters.”

40% of customers buying sports nutrition products also buy vitamins

Traffic and average ticket prices continued to rise, he said, while sales from new products also exceeded historical rates.

Cross selling was also on the rise, with 40% of customers that buy sports nutrition products also buying vitamins - especially the premium-priced vitamin bundles under the Vitapak brand - sales of which were up almost 50% year-on-year, he said.

Fortunato, who recently struck a deal with actor Mark Wahlberg to develop a new nutritional supplement line called MARKED, said the range would initially debut in GNC stores and on GNC.com, but was likely to become widely available through other leading retailers as well.

Q1, 2012 results breakdown

In the three months to March 31, retail revenues were up 22.4% to $469.8m, driven primarily by a 15.8% rise in like-for-like sales in company-owned US stores, a 34.1% rise in e-commerce sales via GNC.com and 139 net new stores from the end of the first quarter of 2011.

Franchise sales were up 31.1% to $101.5m while manufacturing/wholesale revenues were up 17.9% to $53m driven by an 12.7% increase in third party manufacturing contract sales.

Outlook for 2012     

Pittsburgh-based GNC now has more than 5,900 stores in the US and 1,800 overseas selling a range of products under GNC proprietary brands including Mega Men, Ultra Mega, GNC Total Lean, Pro Performance, and Longevity Factors, plus third party brands. 

The firm, which also has a manufacturing and wholesale arm, reported consolidated sales of $2.072bn in the full year for 2011, up 13.7% compared with calendar year 2010.  Adjusted EBITDA was up 30.9% to $346.7m in 2011.

Bosses are predicting sales of approximately $2.37bn for the full year 2012, a 14.5% increase over 2011.

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