GNC invested in the One New GNC model with the intention of bringing back customers to its model, returning business back to positive comps and, ultimately, delivering profitable growth. Despite these efforts, profits dipped in the second quarter of 2017, but the specialty retailer seems to be heading in the right direction nevertheless.
Transactions for the quarter were up 12.3%, building on the growth it saw in the first quarter of the year. Notably, GNC is attracting new customers and noted that they are shopping more frequently. “We're also encouraged by the performance of our original pilot stores, which are outpacing the rest of the chain, in both transactions and average ticket growth, and comp sales for the pilot stores in the second quarter were positive. In many ways, this business is bucking the retail trend, with transaction growth that's well above the APT Retail Index year-to-date,” interim CEO Robert Moran told analysts a little more than a week ago.
He’s also pleased with the performance of the GNC Store on Amazon. According to Moran, more than 50% of online products searches happen on Amazon, 37% of which result in an in-store purchase. “Amazon is not a death knell for brick-and-mortars,” he said, “but a great advertising platform that puts us right in the path of countless new customers.”
Moran also cited the continued importance of private label to its business. GNC’s own brands are aligned with customer needs exclusive to GNC, he explained, carry higher margins and allow the company to tap into its manufacturing capacity. Since March, GNC has increased private label penetration by three percentage points, and there are plans in the works to expand its most successful brands, including Beyond Raw, VitaPak, AMP and Total Lean.
GNC has also just signed a deal to be the exclusive U.S. provider of all Performix supplement products. Performix is one of the industry's leading innovators and GNC's largest national brand. The exclusive agreement will allow GNC to use Performix proprietary technology in its future innovations. As part of the new partnership, Performix will work directly with GNC field operations to implement programs such as demos, training and inventory management. “Product innovation matters to the consumer,” noted Moran. “But in the wellness category, they want and they need trusted advice. Our ability to provide it can help, can support average ticket growth, improve margins and ultimately create customer loyalty.”
The search for a permanent CEO is ongoing, but Moran confirmed that he’s signed up for another six months in the interim role so he can continue to build on the momentum GNC has generated in its first two quarters. “We'll accelerate the initiatives that are delivering growth and generating loyalty and focus intently on margin improvement,” he concluded.