GNC Hopes Third IPO Try is the Charm
Will Wall Street find vitamins sexy? We'll soon find out, as GNC Acquisition Holdings makes what is the retail supplement chain's third attempt at a public offering. Going in its favor -- this company is actually growing net profits. Going against GNC -- revenue is way down from the last time they tried an IPO.
Currently, GNC is owned by an arm of a Canadian teachers' retirement fund. Previous owner Apollo Management tried twice, in 2003 and 2006, to cash out its investment through a public stock market without success before giving up and selling to the fund...which makes one wonder what'll be different this time.
Let's compare the 2006 GNC financials disclosed in that year's IPO filing, which were mostly 2004 figures, with the 2010 GNC financials:
In 2006, the chain had 5,800 stores. Now: 7,100. So it's grown. Nice.
Sales for this year's first half were $921 million, versus $872 million at the same point in 2009. Sounds good. Net income in the same comparison is up to $51 million from $37 million. Still sounding good, and net is better than in 2006.
A 2006 revenue comparison requires doubling 2010 first-half revenue -- which probably works fairly well, it's not a particularly seasonal business -- so guesstimate GNC now does $1.84 billion a year in sales. In 2004, annual revenue was $1.4 billion.
Revenue is up, but there are many more stores now. Let's look at unit growth vs revenue and profit growth. Units have grown 22 percent, while revenue grew 31 percent. Best of all, net profit grew 139 percent, so GNC seems to have learned something about operating smarter in the intervening years.
The increased profit may be due to the efficiency of ecommerce sales, which were just being introduced at GNC around the time of the previous IPO. That muddies the waters and makes it unclear whether per-unit sales are really growing, or whether the growth is online. But any way you slice it, GNC appears to be a stronger company now than it was last time around.
A final factor weighing in GNC's favor is simply the state of the IPO pipeline. Namely, it's currently stuffed with companies circling the markets waiting for the right moment to price their offering. Quite a few of them aren't profitable, so GNC could look good by comparison.
Photo via Flickr user bradley j