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GNC cuts 140 drivers in move to outsource product distribution

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By Thomas Olson
Saturday, Oct. 12, 2013, 12:01 a.m.
 

GNC Holdings Inc. has eliminated all 140 of its driver jobs and outsourced them at its three distribution centers across the country, including 70 jobs at the facility in Leetsdale.

The Downtown-based retailer will begin using contract workers to transport its vitamins, supplements and sports nutrition products to its stores, GNC spokesman Greg Miller said.

GNC has roughly 6,200 company-operated and franchise stores nationwide and about 2,100 franchise stores overseas.

Companies usually outsource functions as a way to save money on salaries and other benefits, such as health insurance and pensions, which could be a significant expense. Miller declined to say how much money the switch to contract workers might save.

“We think this is an appropriate and efficient approach,” he said.

The layoffs leave the Leetsdale facility with about 300 workers. About 500 more remain at GNC's two other distribution centers in Phoenix and Anderson, S.C.

The drivers were not represented by a union, Miller said. They will receive severance and benefit packages.

Analyst Kurt Frederick at Webush Securities, San Francisco, did now know why GNC fired its drivers but said GNC has performed well financially, particularly since revising its Gold Card membership program in May.

GNC's second-quarter earnings rose 7.5 percent to $72 million from $67 million a year earlier. Its sales increased 9.2 percent to $676 million from $619 million.

In response to earlier customer complaints, GNC changed the Gold Card program so that members could access membership discounts throughout the month, instead of just seven days a month. The revisions helped to add customers, which is providing GNC with a larger database of customers to target with promotions, the analyst said.

“That gave them momentum in terms of sales because it got people to come into the stores more frequently,” Frederick said.

The analyst added that GNC's recent focus on growing internationally should benefit the retailer because it is “getting saturated” with stores in the United States.

Earlier this month, for example, GNC announced the acquisition of a leading sports-nutrition, e-commerce retailer in the United Kingdom called A1 Sports Limited. The company is expected to post 2013 sales of about $32.5 million this year.

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

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