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These Health Retailers Are Enticing Long-Term Bets

August 06, 2014 | About:
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kcpl

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On the off chance that there's one industry that seems invulnerable to the general weakness in the retail industy, it is the health supplement and personal care industry that is dominated by players such as GNC Holdings (GNC), Vitamin Shoppe (VSI), and Nu Skin (NUS). The industry has flourished on the back of the obesity epidemic and an ever-increasing awareness in pesonal health.

As per Business Insights, the vitamins and minerals business (barring dietary supplements such as herbal pills, probiotics, and so forth.) is expected to register a healthy CAGR of 4.5%, nearing $30 billion in 2015. Moreover, the probiotics ingredients, supplements, and nourishment business sector is slated to improve at a CAGR of 6.2% till 2018. In the background of these projections, let's take a look at how is GNC is positioned and what it has in store for investors.

Not impressive

GNC's first-quarter results did not impress investors. Administration faulted the weakness upon the terrible winter climate in January and February, which adversely affected similar store sales, or comps.

Additionally, the phase-out of pre-workout supplements after an FDA warning and the phenomenal negative press against vitamins and fish oil-based products also added to the woes.

Beyond the short-term pains

Looking forward, GNC may face short-term pains. Case in point, it is facing challenges in the South Korean market. Also, Venezuela, Turkey, Mexico and Australia are examples of different countries where it is confronting administrative and geopolitical-related business pressure. Then again, GNC is sure in regards to its long haul development story as a result of strategic moves that it is making.

For instance, the part evaluating system has been the right strategic change. GNC is also developing the successful VITAPAK franchise, offered as a feature of GenetixHD brands. It also propelled GNC PUREDGE, a full line of sports sustenance products based on entire nourishment based performance. Keeping in mind the end goal to drive new customers to its stores, GNC launched the Beat Average promotion campaign. This will be broadcast in programming that incorporates ESPN's broadcast of the NFL draft, World Cup, and online sports focus.

Also, GNC acquired The Health Stores, a nine-store network based in Dublin, Ireland. This complements its expansion into Europe last year through Discountsupplements.com, thus stretching the establishment for establishing a significant presence in Europe.

As GNC tries to explore the short-term issues through a series of reformulations, new products, e-business channel, and business sector promotions, its long haul development story looks in place. Nonetheless, comps are relied upon to be level or increase in the low single-digits for the rest of current fiscal.

A glance at peers

Vitamin Shoppe, a moderately smaller player as contrasted with GNC, reported 10% year-over-year revenue development in its first quarter of fiscal 2014. This was determined by positive comps, new store development, robust e-trade performance, and the commitment from Super Supplements. For the 34th consecutive quarter, retail comps were positive.

With a specific end goal to keep the force going, Vitamin Shoppe is including a Fitness Tech line of products, starting with testing small electronic devices such as movement trackers, heart rate monitors, and fitness-specific watches. The organization is also investing in online, versatile and social media channels keeping in mind the end goal to operate its stores and the e-business site as an integrated operation. It has plans to open 60 new stores amid the current fiscal to further drive growth.

Then again, its fantasy run in China, where it has business operations for 10 years, has gotten a makeshift setback. Nu Skin went under the scrutiny of the Chinese administrative authorities for professedly operating a Pyramid Scheme, which is considered illicit in the nation. On the other hand, it as of late escaped with a lower-than-anticipated punishment. It has now resumed its business in China as usual and expects worldwide revenue development of 20% to 24% in the first quarter, reiterating its earlier outlook.

Conclusion

In spite of the fact that GNC may suffer short-term pains, its expansion and poduct re-alignment moves demonstrate that the organization is overall positioned for long haul growth. Given the immense opportunites in the health supplements and personal care industry, GNC can sustain its performance in the long run. As such, investors should examine this stock that is trading close to its 52-week low.


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