GNC Files for Bankruptcy, Closing Up to 1,200 Stores
GNC has filed for bankruptcy and expects to accelerate the closure of at least 800 to 1,200 stores.
GNC had approximately 7,300 locations at the end of March. Around 5,200 of its retail locations are in the U.S., including 1,600 Rite Aid licensed store-within-a-store locations, with the remainder of the locations spread across around 50 countries. The retailer's U.S. and international franchise partners, and all corporate operations in Ireland, are separate legal entities and are not a part of the filing.
The retailer said it has reached an agreement with the majority of its secured lenders and key shareholders to pursue a dual-path process that will allow the company to restructure its balance sheet and emerge as a standalone business or be sold as a going concern.
The 85-year-old vitamin and dietary supplement company has been executing a store portfolio optimization strategy to close underperforming stores, while continuing to invest in omnichannel and brand strategies to better meet consumer demand. This process will enable GNC to accelerate closing stores and allow GNC to “invest in the appropriate areas to evolve for the future, better positioning the company to meet current and future consumer demand around the world,” the retailer said in a statement.
One of those plans to meet consumer demand amid COVID-19 concerns, includes GNC launching the option to buy-online-pick-up-in-store later this year. The retailer also said it has a robust innovation pipeline of ingredients and products to bring to market over the next three years. GNC's largest vendor and a joint venture partner, IVC, is working with the company to ensure a continued supply of products to the company and advance the proposed sale of GNC's business.
Last July, GNC, which is saddled with nearly $1 billion of debt, announced plans to close up to 900 stores as part of the retailer’s “store optimization” effort. Sixty-one percent of GNC’s store base is located in strip centers, while 28% reside in malls and franchisees don’t have any stores in malls. GNC expected, at the time, to reduce its mall store count by nearly a half, from a little over 800 stores malls to 400-500.
Terms of Chapter 11
GNC said its stores will remain open through the bankruptcy process and it expects to confirm a standalone plan of reorganization or consummate a sale that will enable the business to exit from this process in the fall.
Under the terms of its agreement, GNC will look for a buyer, with the initial purchase price set at $760 million. The sale would be executed through a court-supervised auction process at which higher and better bids may be presented. If the sale transaction is timely consummated as outlined, it would be implemented instead of the standalone plan transaction.
The company has secured $130 million in additional liquidity, including $100 million in debtor-in-possession financing and $30 million from modifications to an existing credit facility. (GNC’s U.S. and international franchise partners and all corporate operations in Ireland are not a part of the filing.)
GNC said it is confident that between financing and cash flow from normal operations, and with the continued support of its largest vendor, it will meet its go-forward financial commitments as it works to achieve its financial objectives.
GNC's case is being heard in the U.S. Bankruptcy Court for the District of Delaware. In the coming days, the Company expects to file in the applicable Canadian court seeking recognition of the U.S. Chapter 11 proceeding. GNC is advised in this process by Latham & Watkins LLP, FTI Consulting, and Evercore.