Report: GNC may be looking to go public
PITTSBURGH — GNC is ready to pull the trigger on a long-anticipated initial public offering this Friday, according to several published reports.
It’ll be the third bite of the IPO apple for the Pittsburgh-based specialty chain. But if any time is a right time, that time is now, the company suggested in its prospectus, pointing to the graying of the baby boomer, coupled with increased pursuit of healthier lifestyles, which makes for a strong investment proposition for an already-established specialty channel retailer.
GNC originally filed for an IPO twice while owned by Apollo Management — in 2004 and again in 2006. GNC’s new owners, the Ontario Teachers’ Pension Plan, will be making the latest offering of 16 million public shares at an estimated price of between $15 and $17. That’s roughly half of the current share price of Vitamin Shoppe International, which traded at $34.16 as of late Wednesday morning.
The difference between then (2004 and 2006) and now, besides a change in ownership, is the fact that the smaller specialty operator Vitamin Shoppe — with some 500 locations versus GNC’s more than 3,800 U.S. corporate and franchised locales, excluding Rite Aid locations — has realized a 54.5% growth in share price from a year ago. Vitamin Shoppe opened its trading at $17.57 on Oct. 28, 2009.
In its most recent quarter, GNC posted same-store sales gains of 5.6% across its corporate stores and its website, and 2.9% comparable growth across franchised locations. Each of its corporate-owned-and-operated stores generated $438.2 million in annual sales, up from $422.4 million the year prior. For the 52 weeks ended Dec. 31, 2010, GNC recorded $1.8 billion in sales, up 6.7%. Revenue increased across the company’s retail and franchise segments by 7% and 11.2%, respectively, and declined in the manufacturing/wholesale segment by 1.2%. Adjusted EBITDA was $268.2 million for the year, representing a 16.3% increase over adjusted EBITDA in 2009.
GNC has entered into two significant strategic partnerships within the past year — one with PepsiCo and another with PetSmart. PepsiCo launched its Gatorade G Series Pro first in GNC stores, and plans a similar course for its fortified coconut water Phenom, expected to reach GNC shelves in the second quarter of 2011. More recently, GNC launched an exclusive line of GNC-branded pet supplements through PetSmart.
The company also is growing, projecting square-footage increases of between 3% and 4% in 2011, and suggesting that there are a total of 4,500 potentially viable locations that GNC can continue to grow into without violating its store-within-a-store deal with Rite Aid.
As of Dec. 31, 2010, GNC operated 2,917 GNC Centers and 2,003 GNC-within-a-Rite-Aid locations. In addition, GNC had 903 domestic franchisees and 1,437 franchisees operating outside of the United States.
Target celebrates Earth Month
MINNEAPOLIS — Target announced that as part of its Earth Month celebration, it is offering customers the chance to win a "Refresh Your Nest" home makeover worth up to $50,000 with the help of LEED-accredited designer Sabrina Soto, as well as hundreds of other sustainable prizes.
Guests can log on to Target.com/Eco to enter the sweepstakes.
The Target.com/Eco site also features sustainable products for purchase, sustainable decorating tips from Soto and coupons for use at Target stores.
Other ways Target is celebrating Earth Month include:
Giving away 1 million reusable bags, made from 100%-recyclable Tyvek material, at Target stores nationwide on April 17 (while supplies last);
Giveaways of top Earth Month products; and
Great deals on sustainable products in the weekly ad, available from April 17 to 23.
"From how we build our stores to the way we interact with our guests, environmental sustainability at Target is integrated throughout our business," said Shawn Gensch, Target’s VP marketing. "As part of Target’s ongoing commitment to sustainability, our Earth Month activities are designed to remind our guests of the many ways we can all make small changes, which together make a big difference."
Family Dollar posts sales and profit improvement
MATTHEWS, N.C. — Profit grew by nearly 10% to $123.2 million and sales advanced 8.3% to nearly $2.3 billion as Family Dollar remained on a consistent growth trajectory during its second quarter, ended Feb. 27.
Earnings per share for the period increased 21% to 98 cents, compared with 81 cents in the prior-year’s second quarter.
“Over the last several years, we have accelerated capability-building investments and increased our efforts to improve the in-store shopping experience. These investments have provided a solid foundation for the successful launch of our strategic plan to re-accelerate revenue growth, expand operating margins and optimize our capital structure,” said Howard Levine, chairman and CEO of Family Dollar. “Our performance year-to-date illustrates that we are effectively leveraging these enhanced capabilities and executing well against our business plan, and delivering superior value for shareholders.”
The second quarter saw the company again produce solid same-store sales growth of 5.1%, which it said was almost entirely the result of more customers shopping its stores as determined by the number of transactions. A modest increase in the value of the average customer transaction also contributed to the comps gain. Sales during the quarter were strongest in the consumable and seasonal categories, according to the company.
The rate of profitability improved slightly, as Family Dollar’s gross margins for the second quarter were 35.7%, compared with 35.4% the prior year due largely to less shrinkage, which more than offset higher transportation costs. The shrinkage reduction occurred even though average inventories per store increased by 10% as Family Dollar stocked up on consumables. The company’s expense rate essentially was flat with the prior year at 26.82%, compared with 26.77%.
Looking forward to the back half of its fiscal year, Family Dollar is expecting continued growth and improved profits. Third-quarter and full-year comps are projected to be in the range of 5% to 7%, and additional store growth is planned. At the mid point of its fiscal year, Family Dollar has opened 146 new stores, renovated 313 stores and closed 43 others as part of a full-year plan that envisions the addition of 300 new stores and 80 to 100 closings.
The company ended the second quarter with approximately 6,800 units.
With the additional square footage, expectations of same-store sales growth are forecast to result in third-quarter earnings per share of 92 cents to 97 cents, compared with 77 cents last year, and full-year profitability in a range of $3.13 to $3.23 per share, compared with $2.62 last year.