GNC Making Overnight Image Change In Progress Toward Turnaround
This article was originally published in The Rose Sheet
Executive Summary
The "launch of One New GNC" Dec. 29 at all US company and franchise stores focuses as much on simplifying pricing as on redoing its stores with additional POS terminals to speed checkouts, help customers make decisions based on purchase histories and manage loyalty programs.
[GNC Holdings Inc.] will make an overnight image change later in December as a step in changing the direction the health, wellness and nutritional product manufacturer and retailer's business has been going.
The firm says "the launch of One New GNC" will come Dec. 29 at the 4,464 US company-owned and franchise stores.
Changes GNC noted in a Dec. 15 release focus as much on simplifying its pricing structure with same prices in stores and on its website and on encouraging customers to return as on redoing its stores with additional point-of-sale terminals to speed the checkout process, help customers make decisions based on their purchase histories and manage loyalty programs.
Sales clerks in the stores will be equipped with mobile computing tablets to provide information on customers' questions and recommend products and wellness regimens. GNC has said it expects to spend $8m to $10m this year on its retail changes, mainly on staff training, store signage and marketing.
After referring to GNC as "a badly broken business in need of change" during the firm's third-quarter earnings briefing in October, interim CEO Robert Moran says the overnight in-store changes are an early step for New GNC.
"We're confident it will have a positive impact on the business, but it will take time for the changes to take hold and translate to improved financial results," Moran said.
The firm's problems include its little sales drive from tis Gold Card loyalty program that carries a $20 annual fee and stores not having promoted products in stock as well as inconsistent and confusing pricing and failures at POS checkouts.
Changes include augmenting Gold Card with the free My GNC Rewards program designed as "an easy to use incentive to shop" in GNC's stores and on its website. The firm said it is supporting the program with the launch of a GNC mobile app that will become available by Dec. 28 in the iTunes app and Google Play stores.
A pilot program GNC launched in seven markets during the third quarter attracted more than 250,000 customers to My GNC Rewards.
Stores will mark the One New GNC launch throughout January with entries in a sweepstakes to win 1m loyalty program points awarded to customers with each My GNC Rewards transaction gain during the month.
GNC also said it expects changes in its supply chain should help ensure products are in stock. Changes the firm began making throughout its supply chain in 2015 after the New York attorney general alleged GNC sold herbal supplements that did not contain the labeled ingredients were noted as a stipulation in a settlement federal prosecutors recently announced with the firm linked to charges in a separate investigation. (Also see "GNC Supply Chain Reform Pays Dividends In DoJ Settlement From DMAA Investigation" - HBW Insight, 7 Dec, 2016.)
Reaching those settlements and remaking its retail operations are steps in GNC's long-term and ongoing turnaround strategy. (Also see "GNC Makes Change At Helm As Revenue Decline Continues" - HBW Insight, 28 Jul, 2016.) Its poor earnings performance over the past several years most recently was quantified in third-quarter consolidated revenue dropping 8.1% to $628m and net income slipping 29% to $32.4m, with diluted earnings per share dropping to 47 cents from 54 cents in the year-ago quarter. (Also see "GNC 'Broken Business' Repair: Single-Tier Pricing, Free Loyalty Program" - HBW Insight, 27 Oct, 2016.)