Source: LOHAS Weekly Newsletter
Published: Saturday, November 01, 1997

PITTSBURGH—General Nutrition Cos. Inc. (GNCI) will spend between $60 million and $80 million over the next year and a half repurchasing about 300 of its 1,268 franchises.

According to spokesman Greg Miller, buying back franchises right now is the best way to use the company’s strong free-cash flow.

Miller says GNCI’s strategy in the past 10 years has been to put as much brick and mortar in place as possible, adding 450 stores in 1996 and planning to count 5,000 retail outlets by 2002.

“Franchisees were interested in selling,” he says. “We think this is legitimate use of the money.”

Faced with the same situation in the past, GNCI has repurchased stock, pleasing investors by increasing earnings per share, Miller says.

Right now stockholders have plenty to be happy about without a GNCI stock buyback, Miller says. In its recently released 3Q97 financial report, the company says earnings per share increased 38% over the year-ago quarter. GNCI also reports 3Q97 company store comparable sales were up 10.1% and franchise comps were up 22.1%. Net revenues for 3Q97 were $278 million, compared to $226.6 million in 3Q96.

“It’s fair to say we are strong,” Miller says.

One analyst questioned the company’s strategy, however. “It’s quite a statement on the lack of opportunities the management sees for expansion,” he said.