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GNC's quarterly profit dives

| Friday, Aug. 3, 2007

General Nutrition Centers Inc., the Pittsburgh-based nutrition and supplement retailer, Thursday reported a 64 percent decline in profits during the three-month period ended June 30, mainly because of acquisition-related interest expense that more than doubled.

Net income totaled $4.7 million, down from $13.1 million a year ago.

GNC no longer reports earnings per share following its March 16 purchase by Ares Management LLC and the Ontario Teachers' Pension Plan Board.

Interest expense in the quarter was $23.6 million, up from $10.1 million in the year-earlier period. Revenues increased by 1.8 percent, to $389.5 million from $382.8 million. Sales at stores open at least a year increased 1.6 percent year-over-year in company-owned domestic stores, and 11 percent in Canadian stores.

"We're pleased with the results of the second quarter; every business unit continues to show strong positive movement," said CEO Joseph Fortunato, during a conference call with analysts. "Sales volume for the first half (of 2007) was the highest in five years."

GNC continues to add new stores both domestically and worldwide, including its store-within-a-store concept in partnership with drug chain Rite Aid.

"We will be opening 100 stores domestically this year," Fortunato said. During the second quarter, GNC opened 15 new company-owned locations, closed 20 stores and reacquired from franchisors 10 additional locations.

"At June 30, we had 2,704 company-owned stores in the U.S. and Canada, 1,006 franchise locations and 6,015 locations globally," said Curt Larrimer, chief financial officer.

Fortunato said GNC's partnership with Rite Aid is strong and that a new contract was recently signed with the Camp Hill-based company, with 1,100 additional stores to be added at Rite Aid locations through 2014.

"At the end of 2009, we will have more than 2,000 store-within-a-store locations in operation," Fortunato said.

There are GNCs in 1,270 Rite Aids.

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