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GNC says profit jumps 14%; spending $3M on marketing campaign

| Friday, April 26, 2013, 10:06 a.m.

GNC Holdings Inc. will expand its member discount program nationwide in May, backed by a $3 million marketing campaign, which should push up the retailers' sales, company executives said on Friday.

The Downtown-based retailer of health and wellness products described its plans to offer the program at all 6,200 U.S. stores in a conference call with analysts to review quarterly earnings, which increased 14 percent.

The “Member Pricing” discount program, which was test marketed in Kansas City, New York and Chicago, resulted in sales increases “in the mid-single digits” in those markets, said CEO Joe Fortunato. The program offers discounts to consumers for a $15 annual membership fee.

Key to Member Pricing program is GNC's ability to capture data on consumer purchases and tailor its marketing and product offerings to their individual tastes and preferences.

The Member Pricing programs in test markets initially provided 20 percent discounts for only seven days a month. The national roll-out will feature lower percentage discounts that remain in place for the whole month.

“We will target consumers based on their buying habits,” Fortunato told analysts. “Now we'll know what customers buy and how often they visit the store, and we can send out direct-mail pieces to them,” including email promotions to about 10 million consumers.

Combined with the target marketing GNC will roll out nationally, both in-store and online, the Member Pricing program “should be a positive for them as they go forward,” said Kurt Frederick, an analyst at Wedbush Securities, Los Angeles.

GNC, which has 8,200 locations worldwide, reported earnings in the first three months of the year grew to $73 million from $64 million a year earlier. Per-share results increased to 73 cents from 59 cents, beating analysts' consensus estimates by 1 cent.

Revenue increased 6.6 percent to $665 million from $624 million, as sales rose across its retail, franchise and manufacturing/wholesale segments. Same-store sales increased 1.9 percent at GNC's 5,242 company-owned stores in the United States.

The company also maintained its full-year earnings guidance of between $2.75 and $2.80 a share.

Separately, Fortunato said GNC's Jack3d workout stimulant within three months would contain a different ingredient from the controversial dimethylamylamine, or DMAA. Federal health regulators warned in early April that the ingredient, which is in GNC's and other health-product retailers' products, raises blood pressure and heart rate and could lead to heart attacks. GNC was sued in state court in San Diego in February by parents of a man who they claim died after taking the supplement.

Fortunato said Jack3d was “pretty much safe” because the Food and Drug Administration has not ordered products containing DMAA pulled from shelves. He added that Jack3d represented less than 6 percent of sales.

Frederick said “it's not a big issue” for the company.

Thomas Olson is a staff writer for Trib Total Media. He can be reached at 412-320-7854 or tolson@tribweb.com.

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