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GNC To Close Up To 900 Stores Amid Mall-Based Struggles

GNC To Close Up To 900 Stores Amid Mall-Based Struggles

GNC will close up to 900 stores as part of its goal to reach 2019 and 2020 cost-saving targets, CEO Ken Martindale revealed in a Q2 earnings call. GNC officials first announced in November 2018 that they would close 700 to 900 stores in the U.S. and Canada over the next three years as leases expired, but Martindale reaffirmed that the retailer will “end up closer to the top end” of the estimate.

The negative customer traffic trends that have affected GNC mall stores in recent years have accelerated during the past few quarters, according to Martindale. However, Martindale indicated that its strip center locations are “relatively stable.”

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Of GNC’s approximately 4,100 U.S. locations, 61% are in strip centers and 28% are in malls.

The retailer is focused on trimming the latter group as part of its “store optimization” effort: “I think it could be likely that we'll reduce our mall count by nearly half,” said Tricia Tolivar, CFO of GNC during the earnings call. The retailer operates in more than “800 malls today and over the long-term, we could bring that closer to 400 to 500.”

GNC has shuttered 102 company-owned and franchise locations in the first six months of the year, the company reported. Q2 revenues for the supplements retailer in the U.S. and Canada fell 8% to $476.1 million, while same-store sales declined 4.6%

The closure of company-owned stores led to a $14.9 million revenue decrease in Q2. In domestic franchises, same-store sales in the period fell 1.8% year over year. Operating income margin expanded by 150 basis points to 10.3% from 8.8% in the year-ago quarter.

So far this year, U.S. retailers have announced 7,426 store closures, already outpacing the 5,864 closures during calendar 2018, according to Coresight Research. Total U.S. store closures are estimated to reach 12,000 by the end of 2019.

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