Why Vitamin Chain GNC Is Closing 200 Stores

April 27, 2018, 3:32 PM UTC

GNC Holdings (GNC) is joining the parade of store chains closing a big number of stores as they look to fix their businesses.

The vitamin retailer said in a regulatory filing late Thursday that it plans to close 200 stores this year, a number that could vary depending on its ability to renegotiate leases or move some stores. GNC operates small but ubiquitous locations, with 3,385 stores in the U.S. and Canada, along with franchise stores and small areas within many Rite-Aid (RAD) stores. It has another 2,000 stores abroad.

But the vitamin industry is full of turmoil that is taking its toll on GNC and its rivals. Vitamin Shoppe (VSI) has interviewed turnaround advisers according to the Wall Street Journal, while Vitamin World filed for Chapter 11 bankruptcy protection last year. GNC reported consolidated revenue dropped to $607.5 million in the first quarter, from $654.9 million in the year-earlier quarter.

While GNC is growing internationally, revenues in the U.S. and Canada, its largest markets, fell 4.5%, to $512.4 million for the three months ended Mar. 31, 2018. Its profitability also slipped. So it’s not surprising GNC continues to push international expansion, pursuing opportunities in markets like India and Australia.

Meanwhile, GNC shareholders are set to soon vote on a deal the company struck in February with Harbin Pharmaceutical Group for the manufacturing, marketing, sale, and distribution of GNC-branded products in China. The tie-up calls for Harbin to invest $300 million in convertible perpetual preferred shares and become GNC’s largest single shareholder. A meeting on the deal is set for May 9, 2018.

The GNC store closing announcement came the same day sandwich chain Subway announced it would close 500 U.S. restaurants amid its own turnaround. Like GNC, Subway operates small, but multitudinous stores. Many restaurant chains and retailers from Macy’s (M) to The Gap have found in recent years smaller is often better when it comes to fleet size, making it easier to maintain locations to a certain standard and invest in store upgrades.

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