Living Well With This Wellness Company
Rhodora is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The need to remain healthy and strong in these days of constant stress and backbreaking workloads is a necessity that must not be taken for granted. As they say, "health is wealth”, and many people nowadays are more apt to be health conscious than take unnecessary risks to endanger their health. And one company answering this need is GNC Holdings Inc (NYSE: GNC).
A diversified company that meets diverse deeds
GNC is involved in the retail sales of nutritional supplements like vitamins, herbal and mineral supplements, sports nutrition products, diet products, cleansing and digestion products, sexual health products and other similar health maintenance products. The company even has products that cater to pets, like multivitamins for dogs, and food for cats that can strengthen their hips and joints. Aside from these, GNC also sells sports equipment and accessories like fitness watches, shoes, bottles, bags and gym accessories. These varied products are sold in about 7,800 retail stores in 55 countries worldwide, with the majority of these stores located in the US. GNC also has an online presence where products can be purchased.
Basic GNC health indicator
The company’s revenues are derived from sales through company-owned retail stores, international franchises, corporate partnerships, and e-commerce. For the FY 2012, GNC reported consolidated revenue of $2.4 billion, a 17.3% increase compared to the $2 billion generated in 2011. This resulted in a 2012 net income of $240 million, which was an improvement to the previous year’s $132 million. In the first quarter of 2013, the Board of Directors declared a cash dividend of $0.15 per share of its common stock, a 36% increase compared to 2011.
Risks and uncertainties
Although generally positive about its outlook for 2013, GNC could face some rough roads ahead, including bad publicity, failure to comply with new and existing rules and regulations, disruption in the manufacturing process, interference in the distribution system, and the threats posed by competitors using e-commerce.
It is in this last case that Amazon.com (NASDAQ: AMZN) comes into play as a competitor. Founded in 1995 as an online bookstore, the company is now involved in retail websites, content publication, software development, and distribution. Such varied activities helped it to produce a revenue base of $61 billion, and a gross profit of $15 billion in 2012.
The company has a nutrition and wellness section where it sells vitamins and supplements, weight management, herbal and natural remedies, sports nutrition, and healthy food and beverages products, counted to as much as 200,000 items to choose from. Because of the huge collection of products that can be found all in one place, the odds may not be in favor of GNC in this aspect, not unless there would be queries that are directly associated with the purchasing of the GNC brand.
However, since competitors like Vitamin World, iHerb, The Vitamin Shoppe, and Vitacost also have alternative products on Amazon that match or undercut the price of whatever is being offered by GNC, the aggressive stance of Amazon in terms of utilizing e-commerce is definitely a challenge for GNC to equal or surpass, especially in the nutrition and wellness aspect.
Another major competitor of GNC is Walgreen (NYSE: WAG). Not only is this company involved in e-commerce, but it also provides consumer goods and services, pharmacy products, household products, general merchandise, and home and medical equipment. As of 2012, Walgreen operated 8,030 drugstores in 50 US states, including 700 wellness centers. It has been in business since 1901, giving it wide and vast experience. Its 2012 revenue base totaled $70.8 billion, and gross profit was $20.3 billion.
A year of great opportunities ahead
Despite these challenges, Chairman of the Board, President and CEO Joseph M. Fortunato is still very much upbeat of what 2013 will bring GNC. He specifically mentioned an integrated media campaign that will utilize TV, billboards, in-store campaigns, as well as tapping the potential of social media.
Another reason to be positive for next year, according to Mr. Fortunato, is the wide array of new products that will be launched. These will build on the equity started by its earlier and successful brands like GNC Pro Performance, AMP product lines, and the Amplified Wheybolic Extreme 60.
For 2013, GNC management sees a consolidated revenue increase of 9% to 10%, relying mainly on the continued strength of its domestic and company-owned retail stores, as well as on its e-commerce activities. It likewise intends to open 150 new retail stores in the US, 200 new international franchises, and 30 new GNC-Rite Aid stores to support this endeavor.
GNC will continue its upward movement in terms of profitability and positive shareholder value. This means that a bet placed on GNC will prove to be a good wager, considering the company’s hunger to prove itself despite the many obstacles it faces. There is much to expect with this diversified company, knowing that it has already announced its plans and strategies for 2013, giving assurance and confidence that it can perform and even exceed the expectations of its existing investors and stockowners.
RhodoraDagatan has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!