GNC Deal With HealthSouth Provides Access To 1,900 Ambulatory Facilities
This article was originally published in The Tan Sheet
Executive Summary
General Nutrition Companies will enter a previously untapped niche market through a joint venture with emergency health care provider HealthSouth announced Oct. 2.
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General Nutrition Companies will enter a previously untapped niche market through a joint venture with emergency health care provider HealthSouth announced Oct. 2. Under the agreement, GNC and HealthSouth will pool their resources to develop a "highly specialized brand of health care supplements and nutritional products" for HealthSouth's approximately 1,900 health care facilities and GNC's approximately 4,500 stores nationwide. The two companies will aim to develop "new proprietary formulations that are appropriate for patients undergoing rehabilitation in HealthSouth's network of rehabilitation facilities." HealthSouth facilities are best known for treating thousands of professional athletes for sports-related injuries, including baseball/football player Bo Jackson and basketball star Allen Iverson. "This strategic partnership combines the strength of one of the nation's leading healthcare providers with the nation's leading supplier of nutritional supplements," HealthSouth commented. The first products launched under the joint venture will be "Go For It!" chewable multivitamins and nutritional bars. The two "Go For It!" children's products will reach GNC stores and HealthSouth locations by mid-November and will be promoted via the Internet and on TV. USA Network's "Go For It!" reality game show for kids also will help sponsor the products. Co-branded GNC/HealthSouth nutritional products for adults should begin appearing early next year, according to HealthSouth. GNC will be responsible for manufacturing the products, which might provide the retailer with a needed boost in sales. GNC could use a financial lift, as the supplement firm saw its U.S. same-store sales fall 8%-9% in the wake of the Sept. 11 terrorist attacks, compared to revenues recorded during the same three-week span last year. Prior to the attacks, GNC's domestic same-store sales "were running 3.4% above last year's third quarter," parent company Royal Numico reported Oct. 1. However, even with the recent drop, "same-store sales are up approximately 1.8%" for the quarter as a whole, the firm noted. The results represent preliminary numbers; a full report will be issued Nov. 7. "Despite these developments, worldwide GNC sales in the quarter were up 3.9% versus the previous year to $357 mil.," Numico said. "Good growth abroad and in franchising supported the disappointing developments over the last weeks in the U.S.," the firm added. Two GNC stores near the World Trade Center were damaged, although no employees were hurt. The retailer's store in the Pentagon's main concourse level was unharmed. Overall, the firm reported minimal disruption to store and distribution operations from the attacks (1 (Also see "CRN Annual Meeting Cancelled; CHPA Seminar, Expo East Still Set For October" - Pink Sheet, 24 Sep, 2001.)). Another area of possible sales growth for GNC could come from its "stores-within-stores" agreement with Rite Aid. The two companies launched the program in early 1999. In the third quarter, 66 GNC outlets opened in Rite Aid stores, bringing the total of GNC stores-within-a-store to 730, Rite Aid President & Chief Operating Officer Mary Sammons stated during an analysts call Oct. 2. The drug chain now has GNC stores in roughly 20% of its outlets. Rite Aid CEO Bob Miller noted last month that the company plans to add 200-300 more GNC stores-within-a-store during the year and called the joint program "very successful." The continued store additions should help Royal Numico's bottom line. The company noted that preliminary data indicated it recorded total quarterly sales of $957.1 mil., up a scant .5%. The conglomerate's North American sales totaled $560.6 mil. for the quarter, down 3% from the year-ago period. The drop was likely due, in large part, to an 18% sales decline for its subsidiary Rexall Sundown (2 (Also see "Numico To Appoint New Rexall CEO "Shortly" Following DeSantis Resignation" - Pink Sheet, 8 Oct, 2001.)). Numico's Consumer Diets & Sports Nutrition segment saw revenues jump 11% for the quarter to $271.6 mil. However, sales for its Vitamins & Herbs division dropped 14% to $312.6 mil. |