GNC 2010 Annual Report Download - page 54

Table of Contents
Comparison of the Years Ended December 31, 2009 and 2008
Revenues
Our consolidated net revenues increased $50.3 million, or 3.0%, to $1,707.0 million for the year ended December 31, 2009 compared to
$1,656.7 million for the same period in 2008. The increase was the result of increased sales in all of our segments.
Retail. Revenues in our Retail segment increased $37.0 million, or 3.0%, to $1,256.3 million for the year ended December 31, 2009
compared to $1,219.3 million for the same period in 2008. The increase from 2008 to 2009 included an increase of $10.8 million for sales
through www.gnc.com. Sales increases occurred in the major product categories of VMHS and sports nutrition. Sales in the diet category were
negatively impacted by the Hydroxycut recall that occurred in May 2009. Our domestic company-owned same store sales, including our internet
sales, improved by 2.8% for the year ended December 31, 2009. Our Canadian company-owned stores had improved same store sales of
0.8%, in local currency, for the year ended December 31, 2009 but declined when measured in U.S. dollars due to the volatility of the U.S.
dollar. Our company-owned store base increased by 51 domestic stores to 2,665 compared to 2,614 at December 31, 2008, primarily due to
new store openings and franchise store acquisitions, and by 7 Canadian stores to 167 at December 31, 2009 compared to 160 at
December 31, 2008.
Franchise. Revenues in our Franchise segment increased $6.2 million, or 2.4%, to $264.2 million for the year ended December 31, 2009
compared to $258.0 million for the same period in 2008. Domestic franchise revenue decreased by $1.4 million for the year ended
December 31, 2009 as increased product sales were more than offset by lower franchise fee revenue. Domestic royalty income was flat despite
operating 45 fewer stores during 2009 as compared to 2008. There were 909 stores at December 31, 2009 compared to 954 stores at
December 31, 2008. International franchise revenue increased by $7.6 million for the year ended December 31, 2009 as a result of increases in
product sales, partially offset by lower franchise fee revenue. International royalty income increased $0.5 million for the 2009 period compared
to the 2008 period as sales increases in our franchisees' respective local currencies were impacted by the strengthening of the U.S. dollar from
2008 to 2009. Our international franchise store base increased by 117 stores to 1,307 at December 31, 2009 compared to 1,190 at
December 31, 2008.
Manufacturing/Wholesale. Revenues in our Manufacturing/Wholesale segment, which includes third-party sales from our manufacturing
facility in South Carolina, as well as wholesale sales to Rite Aid and www.drugstore.com, increased $7.1 million, or 4.0%, to $186.5 million for
the year ended December 31, 2009 compared to $179.4 million for 2008. Sales increased in the South Carolina plant by $4.4 million, and
revenues associated with Rite Aid increased by $1.4 million. This increase was due to increases in wholesale and consignment sales to Rite
Aid of $4.6 million, partially offset by lower initial and renewal license fee revenue of $3.2 million as a result of Rite Aid opening 197 fewer
franchise store-within-a-stores in 2009 as compared to 2008. In addition, sales to www.drugstore.com increased by $1.3 million in 2009 as
compared to 2008.
Cost of Sales
Consolidated cost of sales, which includes product costs, costs of warehousing and distribution and occupancy costs, increased
$33.8 million, or 3.1%, to $1,116.4 million for the year ended December 31, 2009 compared to $1,082.6 million for the same period in 2008.
Consolidated cost of sales, as a percentage of net revenue, was 65.4% for the year ended December 31, 2009 as compared to 65.3% for the
year ended December 31, 2008. 48