GNC 2011 Annual Report Download - page 56

Table of Contents
increase was the result of increased sales in our Retail and Franchise segments, partially offset by a decline in our Manufacturing/Wholesale segment.
Retail. Revenues in our Retail segment increased $88.1 million, or 7.0%, to $1,344.4 million for the year ended December 31, 2010 compared to
$1,256.3 million for the same period in 2009. Domestic retail revenue increased $64.8 million as a result of an increase in our same store sales and
$17.1 million from our non-same store sales. The same store sales increase includes GNC.com revenue, which increased $12.2 million, or 26.2%, to
$59.0 million, compared to $46.8 million in 2009. Sales increases occurred primarily in the vitamin and sports nutrition categories. Our domestic company-
owned same store sales, including our internet sales, improved by 5.6% for the year ended December 31, 2010 compared to the same period in 2009.
Canadian retail revenue increased by $6.1 million in U.S. dollars, primarily due to the weakening of the U.S. dollar from 2009 to 2010. In local currency,
Canadian retail revenue declined by CAD $3.3 million. This decline was primarily a result of a CAD $5.6 million, or 5.7%, decline in company owned same
store sales, partially offset by an increase of CAD $2.3 million in non-same store sales. Our company-owned store base increased by 83 domestic stores to
2,748 compared to 2,665 at December 31, 2009, primarily due to new store openings and franchise store acquisitions, and by 2 Canadian stores to 169 at
December 31, 2010 compared to 167 at December 31, 2009.
Franchise. Revenues in our Franchise segment increased $29.6 million, or 11.2%, to $293.8 million for the year ended December 31, 2010 compared
to $264.2 million for the same period in 2009. Domestic franchise revenue increased by $7.2 million, or 4.0%, to $185.9 million in 2010, compared to
$178.7 million in 2009, primarily due to higher wholesale revenues and fees. There were 903 stores at December 31, 2010 compared to 909 stores at
December 31, 2009. International franchise revenue increased by $22.4 million, or 26.2%, to $107.9 million in 2010, compared to $85.5 million in 2009,
primarily the result of increases in product sales and royalties. Our international franchise store base increased by 130 stores to 1,437 at December 31, 2010
compared to 1,307 at December 31, 2009.
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, www.drugstore.com and PetSmart, decreased $2.3 million, or 1.2%, to $184.2 million for the year
ended December 31, 2010 compared to $186.5 million for 2009. Third-party sales decreased in the South Carolina manufacturing plant by $15.3 million due
primarily to our transition from low margin commodity products to higher margin, specialty product contracts, and other revenue decreased by $1.1 million.
This was partially offset by an increase in wholesale revenue of $14.1 million.
Cost of Sales
Consolidated cost of sales, which includes product costs, costs of warehousing and distribution and occupancy costs, increased $63.6 million, or 5.7%,
to $1,180.0 million for the year ended December 31, 2010 compared to $1,116.4 million for the same period in 2009. Consolidated cost of sales, as a
percentage of net revenue, was 64.8% for the year ended December 31, 2010 compared to 65.4% for the year ended December 31, 2009. Consolidated cost of
sales increased primarily due to higher sales volumes, higher lease related costs as a result of operating 85 more stores at December 31, 2010 than 2009, and
higher fulfillment costs related to increased web sales.
Selling, General and Administrative ("SG&A") Expenses
Our consolidated SG&A expenses, including compensation and related benefits, advertising and promotion expense, other SG&A expenses, and
amortization expense, increased $18.6 million, or 4.5%, to $428.1 million, for the year ended December 31, 2010 compared to $409.5 million for
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