Twinlab Sales To GNC Off 46% In 2000; Lower 2001 Sales Expected
This article was originally published in The Tan Sheet
Executive Summary
Twinlab sales to GNC stores dropped 45.6% to $35.2 mil. in 2000, President & CEO Ross Blechman said during an April 2 conference call with analysts.
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Twinlab sales to GNC stores dropped 45.6% to $35.2 mil. in 2000, President & CEO Ross Blechman said during an April 2 conference call with analysts. The decline in revenues from one of its most important retail customers pulled Twinlab's overall sales down 11.2% for the year to $280.4 mil. Business with GNC accounted for 13% of Twinlab's net sales in 2000. Second-half sales to the supplement chain were up significantly compared with the first six months, $29.8 mil. compared to $5.4 mil., Blechman said. However, reduced consumer demand and the expanded presence of Royal Numico-owned products on GNC shelves will combine to further lower Twinlab sales to the chain in 2001. GNC "has indicated that, due to inventory management efforts, it will purchase significantly less product from Twinlab in 2001 versus 2000," the Hauppauge, N.Y.-based marketer noted in its 10-K Securities & Exchange Commission filing for the year. Blechman maintained the company's relationship with GNC is "still strong," but noted the chain already is "heavy" with inventory in product areas supplied by Twinlab. While GNC's new buying patterns negatively affected Twinlab during the year, the firm's retail sales to other health and natural food stores rose 6.2% in 2000, according to Blechman. Natural products distributor Tree of Life, Twinlab's other largest single customer, also accounted for 13% of the firm's net sales in 2000. Company sales to the health and natural food channel overall, including GNC and the independents, totaled approximately $175 mil. during the year, Twinlab reported. Sales to mass market outlets increased 4.8% in 2000, despite a "constriction of shelf space," the company said. Approximately $47 mil., or 16.7% of Twinlab's 2000 net sales, came from mass retailers. In addition to the sale of its own brands, Twinlab's mass market business includes private label herbal supplements marketed under the Wal-Mart Spring Valley brand. With a substantial sell-in to food, drug and mass channels, sales of the company's Metabolift diet brand grew 55% in such outlets during the year, the company said. Meal replacement powders and bars were added to the line in the fall, and Twinlab launched national print and radio advertising for Metabolift in January; marketing support will continue through June, Blechman said. In addition, a new dedicated Web site for the brand is up and running. Despite the campaign for Metabolift, Twinlab's overall ad spending in 2000 declined 21% to $16.8 mil. Research and development spending increased about 37% to $2.6 mil. for the year, resulting in the launch of over 20 products. In the direct selling channel, the Changes International division recorded a nearly 19% decline in 2000 sales to $38.1 mil. Twinlab attributed the decrease to a domestic drop-off only partly offset by growth in foreign markets and noted it is "evaluating numerous strategies intended to address the downward trend" at the multi-level marketing group. Sales for the Bronson catalog division were down 17% to $21.4 mil. in 2000. To reinvigorate direct sales, the company plans to begin test marketing a supplement line developed under a joint venture with Reader's Digest in the second quarter. The products will be sold via direct mail and the Internet (1 (Also see "Twinlab" - Pink Sheet, 30 Oct, 2000.)). Extraordinary expenses, including a $16 mil. third quarter charge related to herbal product inventories, contributed to a $51.9 mil. net loss for the company in 2000. Twinlab recorded a $5.2 mil. deficit in 1999. The $16 mil. charge includes $8 mil. in increased reserves for excess and slow-moving inventory. Another $8 mil. in book-to-physical inventory variances was discovered at the firm's Utah facility, where the Nature's Herbs line is manufactured. Declines in the herbal category also prompted the company to halt the production and "active marketing" of several products in the line (2 (Also see "Twinlab Sales Affected By Product Returns, Inventory Reduction" - Pink Sheet, 20 Nov, 2000.)). Also impacting earnings was a $26 mil. adjustment in deferred tax assets and a $2.3 mil. bad debt charge taken following the bankruptcy of company distributor Super Nutrition, Twinlab said. Looking forward, Twinlab announced the establishment of a $60 mil. line of credit that will be used to increase its liquidity and fund day-to-day operations. Provided by CIT Group, the credit line is $10 mil. higher than the company's previous facility. |