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GNC Holdings CEO Robert Moran realizes that the company made an incredibly bold move at the end of 2016, launching One New GNC that represents a fundamental change in its business model.
GNC closed every one of its stores on Dec. 28, 2016, and reopened the following day as a New GNC, launching the Fundamentally Transform Business Model, a model that is built around our its core strengths and the customer needs, wants, and aspirations that are designed to generate profitable growth.
That growth was a bit slow coming. But, Moran sounded very positive during last week’s second-quarter earnings call.
“When we designed the One New GNC, we did it with the customer in mind,” he explained. “We were making bold changes in investments to leverage the strength and advantages inherent in our model, fix what was broken, and improve the customer experience. During the second quarter, we saw those improvements begin to pay off and made good progress toward our goal of delivering meaningful profitable growth. It is still early days and we have work to do, but it looks like we are headed in the right direction.”
Transactions for the quarter increased 12.3 percent.
“We are attracting new customers to GNC,” Moran added. “They are shopping more frequently, and we’re converting more of them. We’re also encouraged by the performance of our original pilot stores, which are outpacing the rest of the chain, in both transactions and average ticket growth, and comp sales for the pilot stores in the second quarter were positive. The challenges in our sector are well-publicized as our concerns about the future of retail, but we believe there is an opportunity for business models like GNC that listen and respond to the customer and give them products and experiences they can’t get anywhere else.”
myGNC Rewards now has approximately 7.8 million members and, halfway through the year, the company has reached 80 percent of its 2017 enrollment goal.
“After six months, we continue to believe myGNC members are on track to visit six times a year, compared with Gold Card members who visited just four times in an entire year,” Moran said. “PRO Access, our premium loyalty offering, has enrolled nearly 325,000 members since its launch in March. Our core and most profitable customer, the health enthusiast, is responding well to the program, which includes offerings tailored to their individual interest, purchase habits and needs.”
In the second quarter, PRO Access members visited twice as often, purchased two times as many products, and spent significantly more.
“Enrollment in the PRO Access program is trending a bit below our expectations, and we are now implementing a bonus point offering that gives PRO Access members instant gratification,” Moran added. “So far, we’re seeing improvement from this incentive with limited margin impact. PRO Access and myGNC also are growing the ranks of contactable customers. Today, we have three times as many customer email addresses than we had six months ago. We’re gathering data that can help us truly understand our customers and developing the platforms and expertise to tailor our communication, regimen recommendations and offers to their specific interests and needs. We designed and invested in the One New GNC to bring customers back to our model, return this business to positive comps, and ultimately, to deliver profitable growth and regain our position as a market leader. In the second quarter of 2017, we made good progress toward those goals.”
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