GNC To Ax Nearly 900 Stores, Many In Malls

Supplement and vitamin retailer GNC has confirmed that it will close as many as 900 stores nationwide this year. The company, which has about 4,100 locations in the U.S., will reduce its inline mall locations by as much as half.

There are about 800 mall locations now, GNC Chief Financial Officer Tricia Tolivar said during the company's Q2 2019 earnings call Monday. "Over the long term, we could bring that closer to 400 to 500."

"The negative trends in traffic that we've seen in mall stores over the past several years [have] accelerated during the past few quarters, putting additional pressure on comps," GNC Chairman and CEO Ken Martindale said during the call. 

The company reported that domestic same-store sales in Q2 2019 decreased 4.6% compared with the second quarter of 2018. GNC also reported revenue of $534M during the second quarter of this year, compared with $617.9M a year earlier.  

As a result of poor mall traffic, it is likely the company will end up closer to the top end of the estimate of 700 to 900 store closures in 2019 that it made earlier this year, Martindale said.

That will represent an accelerated pace of closures for the second half, since only about 200 GNCs were closed in the first half of 2019, CBS Pittsburgh reports.

"As part of our work to optimize our store footprint, we're increasing our focus on mall locations ... we have a great deal of flexibility to take further action here due to the short lease terms we have across our store portfolio," Martindale said.

Martindale stressed that strip-center GNC locations have been more stable in terms of comp-store sales. About 61% of the Pittsburgh-based company's stores are in strip centers, while 28% are in malls.

The disappearing GNCs promise to accelerate the overall rate of U.S. retail store closures this year, which as of mid-July was 7,426 announced, according to Coresight Research.

Year-to-date retail closures announced in the U.S. have already exceeded the total for the full year 2018, when there were 5,864 closures and 3,258 openings, Coresight said.

Malls in many markets are taking a beating, especially as department store anchors fail. The Orchards Mall in Benton Harbor, Michigan, for example, lost its last remaining anchor tenant when its J.C. Penney closed after Independence Day. Even an offer of free rent for three years from the landlord couldn't persuade the retailer to stay.

Retail failure isn't consistent across the nation, however. Boom markets such as the major metros of Texas have been able to support retail growth. CBRE reported that the retail sector had a 94.7% occupancy rate across the Dallas-Fort Worth market, with 893K SF absorbed in the second quarter of 2019.