Coverage: GNC closes its stores to revamp pricing
GNC Holdings, the retail chain that sells vitamins and supplements, closed about 4,500 U.S. stores for a day on Wednesday to synchronize its in-store and online prices, install new cash registers and launch a revamped loyalty program.
Roger Yu of USA Today had the news:
The dramatic move comes two months after interim CEO Robert Moran said the company’s pricing structure was confusing, products were often out of stock and cash registers were outdated. Its business model was “broken,” he said.
“The company will offer a single price both in store and on GNC.com, replacing multiple pricing structures across channels and membership levels,” the company said earlier this month in announcing the temporary closure.
The new cash registers will be rolled out across its stores and “will speed the checkout process, help guide customer decisions based on purchase history and manage loyalty programs,” it said.
GNC also plans to introduce other “changes to its supply chain” to help ensure products in demand are in stock, it said.
“The New GNC leaves the old, broken model behind,” Moran said. “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.”
Brian Sozzi of TheStreet.com reports the company is trying to stave off closure:
When the stores open their doors Thursday, labels for GNC’s protein powders, herbal remedies and nutritional supplements will feature a single price. About 50% of the company’s products will be offered at lower prices than before, while a quarter of the prices will be higher. Gone will be the company’s generally unpopular Gold Card rewards program, replaced by a new simplified one called My GNC Rewards. The company will also launch a new mobile app.
No word on whether the company will halt its notorious hard-sale approach on higher priced items and private label products by store employees. But on December 29, the company plans to emerge as the “New GNC.”
GNC’s stock dropped as much as 4% to $11.07 in afternoon trading on Wednesday.
To be sure, drastic measures such as these needed to be taken at GNC, which for years has lost share to more competitively priced online vitamin sellers and Walmart. Meanwhile, shoppers have become disenchanted by GNC’s high-pressure shopping experience and confusing prices. Tepid mall traffic hasn’t helped the mostly mall-based retailer, either.
GNC’s third-quarter same store sales decreased 8.5% at U.S. company-owned stores (including GNC’s online business), and dropped 8.9% at U.S. franchise locations. Net earnings plunged 30% from the prior year to $32.3 million.
John Kell of Fortune notes that the company has struggled to ensure prices are the same at its stores and its website:
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 GNC.com. 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.