Things will get worse before they get better at GNC Holdings.
But for GNC, the nation’s largest specialty retailer of health, wellness, and sports nutrition products, its major rebranding launch less than two months ago was designed to magnify customer experience and customer engagement.
GNC Holdings Interim CEO Robert F. Moran, however, offered a mixed message during the company’s recent fourth-quarter earnings call.
“The results in the fourth quarter were certainly not what any of us wanted to see,” Moran said. “But I want to be clear this performance simply does not reflect the business model we have today or what we are now capable of delivering for our customers and our shareholders. The ongoing and increasingly dramatic revenue declines GNC has experienced over the last several quarters are indicative of a company that has lost touch with its customers, its solid competitive differentiators, and its place in an attractive growing market segment.”
Moran added: “When we closed every store on Dec. 28 and reopened the following day as a New GNC, we launched the Fundamentally Transform Business Model, a model that is built around our core strengths and the customer needs, wants and aspirations that are designed to generate profitable growth.”
Although company officials only have six weeks of system-wide data since the brand relaunch, Moran is very excited about the customer engagement trajectory.
“Since the launch of the One New GNC, transactions are up approximately 7 percent in company-owned stores, which means we are now generating the strongest transaction growth in several years,” Moran said. “Trends in franchise stores are similar to what we have been seeing in the company-owned location. Additionally, both generations of pilot stores, transactions, and average ticket growth is outpacing the rest of the chain, suggesting that the changes are continuing to resonate with our associates and our customers. While the average ticket is down as a result of the price and promotional changes we made, it is coming better than planned.”
Online sales are beginning to improve, with the Jan. 12 launch of the GNC store on Amazon.
“In the One New GNC, we’re no longer asking customers to sort through up to five different prices for the same product,” Moran explained. “Now, customers will find standardized competitive pricing across all our platforms. We have not set out to be an everyday low-priced player, but are pursuing unknown value-added pricing strategy. We’re sharply priced on categories that drive consumer price perceptions and where we have more pricing flexibility we're working on protecting our margins. We’re also pleased with the initial performance of our new free loyalty program. myGNC Rewards replaces our outdated Gold Card, which simply was not doing enough to build loyalty or grow revenues.”
The myGNC Rewards loyalty program is designed to grow both frequency and basket size. Members earn a point for every dollar they spend at GNC and get cash-back rewards when they hit 150 points. In the first weeks of the rollout, enrollment is trending ahead of our projections. GNC currently has 3.3 million myGNC Rewards members, which is well ahead of company expectations.
“While we have yet to put a national focus on the paid PRO Access loyalty program, customers are discovering it,” Moran explained. “And so far, we’re seeing about 70 percent of the subscribers were prior Gold Card members. We believe PRO Access has the power to replace Gold Card revenues and build loyalty and create passion it advocates for the brand. The program pulls from successful offerings such as Amazon Prime and Birchbox and is designed around what matters to the GNC customers. We believe member benefits, including free shipping, quarterly discount days, access to other healthy lifestyle coaches and solutions, opportunities to participate in product development panels, and wellness boxes tailored to members purchase habits and needs, offer a compelling value proposition for the GNC core customer to help them be an enthusiast.”
Moran said GNC plans to begin promoting the PRO Access loyalty program in March.
“The dramatic changes we made in pricing and loyalty creates margin headwinds in the near-term,” Moran added. “But based on transaction lift, the traction on our new loyalty program, with the healthy percentage of signups coming from prior Gold Card members, we are confident that these short-term investments will deliver profitable top-line growth.”