Supplement marketer perseveres despite disruptions in GNC sales channel

By Hank Schultz

- Last updated on GMT

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Getty Images

Related tags Sports nutrition Sports nutrition products Sports nutrition sector COVID-19

FitLife Brands, a marketer of a variety of dietary supplements, posted modest sales gains despite disruptions caused by problems at GNC, which is the company’s primary sales channel.

Wagon hitched to falling GNC star

FitLife is an Omaha, NE-based company that markets a number of sports nutrition and bodybuilding supplements under the names such as NDS Nutrition, Energize, Siren Labs and Core Active. In 2014 the company switched to GNC captive distribution​, which at the time was seen as a way to earn higher profits for less work, even if unit prices were lower.

As the GNC star started to fade, the company sought to move to more of an omnichannel distribution strategy.  In 2018 the company established an Amazon store front ​as foot traffic and sales in GNC company owned and franchise stores continued to decline.

At that time, GNC’s slide from its heyday in the 2010-2013 time frame seemed to have slowed.  Now, however, GNC is engaged in high stakes, week-by-week negotiations​ to keep the company alive as it manages a heavy debt burden and a threatened delisting from The New York Stock Exchange​.

Brand owed more than $600,000 by GNC

GNC’s problems have become FitLife’s problems, said FitLife CEO Dayton Judd.  In a press release announcing the company’s first quarter earnings, Judd said FitLife has $1.1 million in accounts receivable outstanding, of which 66% was owed by GNC. Sales of the company’s products through GNC franchise locations dropped as much as 55% in March, and the company recorded no revenue from the chain in April, as GNC worked through existing inventory.

Judd said FitLife received new orders from GNC in the first half of May and began shipping products again, but expects revenue from its GNC channel to be lower year over year for the rest of 2020.

Online sales ramping up

Despite those problems, there were bright spots in the company’s earning report.

“I am very pleased with the company’s performance during the first quarter, especially given the disruption that began in mid-March due to the COVID-19 pandemic,” ​Judd said.

Among the highlights was a 100% increase in online sales so far in the second quarter, with direct to consumer sales now accounting for 14% of the company’s overall revenue. For the first quarter, FitLife recorded  $6.2 million in total revenue, a 4.6% increase over the same period in 2019.  Through aggressive cost-cutting measures, the company also managed to improve its net income, which came in at $1.4 million, or a 20% increase year over year.

FitLife’s shares were trading at more than $14 a share in late 2019.  But GNC’s issues caused the stock to tumble.  Before the recent earnings announcement the shares were trading at $9.14, but have improved to $11 a share today.

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