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GNC Closes 4,464 Stores to Revamp Pricing

December 28, 2016, 4:33 PM UTC
Inside A GNC Holdings Inc. Store As Earnings Beat Analayst Estimates
A customer checks out at a GNC Holdings Inc. store in New York, U.S., on Thursday, Feb. 14, 2013. GNC Holdings Inc., a retailer of health and wellness products, reported revenue increases of 10.9% in the fourth quarter and 17.3% for the full year. Photographer: Jin Lee/Bloomberg via Getty Images
Jin Lee/Bloomberg/Getty Images

GNC, the health and wellness retailer, closed 4,464 stores on Wednesday to give the company time to revamp in-store pricing for vitamins and supplements in a bid to lure back shoppers that have been bulking up elsewhere.

The revamp at GNC (GNC) is a bid to fix sputtering sales and a sharply declining stock price as the brick-and-mortar retailer struggles to compete on pricing with rivals like Costco (COST) and (AMZN). Because pricing of vitamins, sports nutrition, and diet products are so transparent, GNC has found itself at a disadvantage by relying on old, complex pricing methods (such as pricing online products differently than those in stores) that aren’t compatible with today’s mobile-first shopper. Executives have conceded that the pricing at GNC was a “badly broken business model” that was in need of a change.

“Pricing has been a particular issue for our brand,” Robert F. Moran, interim chief executive officer of GNC, told analysts during a conference call in October. He vowed to change how GNC prices and promotes its products to eliminate confusion.

To do that, GNC closed stores on Wednesday so it can launch what the company is calling “One New GNC” on Thursday. There will be a single price for items sold in the store and on, replacing multiple pricing structures across the various channels and membership levels. The company is also launching a new mobile app and a new loyalty program named My GNC Rewards.

It is almost astonishing that it took GNC this long to figure out that pricing for goods it sells in the stores must match what the company charges on Because the vast majority of consumers—by some accounts 90%—use their smartphones while shopping in stores, any disparity in pricing is likely to turn off shoppers. If a retailer is charging more for a good online than in the store, or vice versa, it creates friction that will lead to dampening sales.

For GNC, sales have been painful of late. Third-quarter sales slipped 8.1% to $628 million, due to declines in the U.S. and markets abroad. Annual sales have stagnated at around $2.6 billion the past three years after increasing by nearly $600 million from 2011 to 2013.

Wall Street investors have responded by punishing the company’s shares. GNC’s stock was a darling when it went public in 2011—in fact it was the best performing IPO that year with a gain of 83%. But shares are down 64% so far in 2016, trading at around $11 apiece, far off the all-time high of near $60 in late 2013. That explains why GNC’s board earlier this year said publicly that the company was weighing strategic alternatives, including a potential sale.

“We have much work to do in order to continue this turnaround but we believe we are laying the foundational elements of it,” Moran said in October. “It will take time, but we believe we will start to see some results of our efforts in 2017.”