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GNC: The Store Base

Dec. 06, 2018 8:57 PM ETGNC Holdings, Inc. (GNC)38 Comments
Carlton Getz, CFA profile picture
Carlton Getz, CFA


  • GNC is on track to close about 200 company stores in the current year.
  • GNC announced during the third quarter call plans to close 700-900 additional company stores over the next three years.
  • However, these numbers relate only to company owned stores – total store closures including franchisees and store-within-a-store locations are running at a higher rate.
  • We develop our initial framework as we continue to update our models for the projected impact of the additional store closures on financial results.

GNC (NYSE:GNC) began focusing serious attention on the company’s store base last year with the announcement that the company would close approximately 200 company operated stores over the course of the current year. The company upped the ante in the most recent quarterly conference call by announcing plans to close between 700 and 900 additional stores over the next three years – possibly upwards of 25% of the company’s existing company operated domestic store base. The changes are probably overdue (with consideration given to the terms of the associated leases) based on the company’s statement that 10% of current company operated locations (or possibly less, as discussed below), which comes to as many as 320 stores, are currently EBITDA breakeven or negative. However, this announcement masks an already accelerated trend of closures when considering all store types. Indeed, in the last four quarters, the total number of GNC locations hasn’t declined by 200 but closer to 542 when all location types are included in the calculation.

We discussed our first step in developing updated economic models for the company based on the potential impact of the company’s proposed joint venture. In this article, we discuss the second step by reviewing store closure activity, providing an initial rough sketch of the economics of store closures, and outlining the early framework we’re using to refine our forward models for the company to account for the impact on revenues, operating income, and other financial metrics from closing 700-900 additional store locations.

Store Closures

GNC’s store base peaked at around 9,090 store locations of all types at the end of 2015 just before the company began to run into serious trouble with sales. The company has since seen store closures, particularly in the last two years, erase more stores than were added in 2014 and 2015. Domestic franchise

This article was written by

Carlton Getz, CFA profile picture
The author writes on behalf of Winter Harbor Capital, a private fund, and oversees private portfolios for individual and institutional clients. The author founded an investment company in 1995 with the view that a value oriented investment philosophy focused on intrinsic value and long term opportunities could generate superior absolute returns over time, leading to portfolios with unusual investment tenure sometimes exceeding 10 years. In addition to stints in micro and small capitalization research at Wasatch Advisors in Salt Lake City and in private banking with J.P. Morgan Private Bank in New York City, the author is a registered investment advisor, licensed professional engineer, and graduate of the Darden School at the University of Virginia.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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