1. Qianwen Wu, Wenqiang Xu, Yi Liu and Zuowei Xu
December 10, 2013
Qianwen Wu, Wenqiang Xu, Yi Liu and Zuowei Xu

2. Agenda Introduction Macroeconomic Outlook Industry Overview
Company Overview
Financial Analysis
Valuation
Recommendation

3. Introduction Started as a health food store in1935
A leading global specialty retailer of health and wellness products: vitamins, minerals and sports nutrition products.
8100 locations in the United States and 54 international countries
Listed on April 1st, 2011and has already returned far more cash to shareholders than it raised in IPO
Industry: Nutritional Supplements Industry
Source: Company overview, GNC website

4. Macroeconomic Outlook
Population over 50 and older
Nutrition Supplement
Disposable income
CCI
Consumer Confidence Index is a good indicator for the future consumption of nutrition supplement. The index soars above expectations came in at 82.5, beating the forecast of 76.0 in December.

5. Macroeconomic Outlook
Source: U.S. Census Bureau, 2010 Census Summary File 1, page 6
Source: 2010 Census Summary, U.S. Census Bureau

6. Macroeconomic Outlook
Disposable income has been increasing from 9,800 to 11,600 for the past ten years. a
Source:
Source: 2013 research. Stlouisfed.org

7. Nutritional Supplements Industry
Key Statistics:
Market size: 35 billion
Annual growth: 5.7% for
Source: Nutrition Business Journal, page 6
Source: Nutrition Business Journal

8. Nutritional Supplements Industry
Target Consumers:
According to the National Health and Nutrition Examination Survey, more than 50% of adults are taking a dietary supplement and 35% use a multivitamin product
According to the IBIS World, older white women with higher education levels, lower BMIs, and higher physical activity levels are the most likely consumer to using a supplement.
Source: Nutrition Business Journal, page 7
Source: Nutrition Business Journal

9. Nutritional Supplements Industry
Stock
New Products
Brand
Availability
Key to Success:

10. Industry Forces Analysis
Rivalry:
High
Buyers:
Substitutes:
Low
Suppliers:
New Entrants:
Median

11. Industry Forces Analysis
Bargaining Power of Suppliers: Low
The raw materials has no product differentiation, which is a competitive market..
Bargaining Power of Buyers: HIGH
The industry is fragmented and consumers have a lot choice to choose.
Threat of New Entrants: MEDIUM
The steady revenue growth attracts lots of investors.
New regulation imposed by the Food and Drug Administration(FDA)

12. Industry Forces Analysis
Threat of Substitutes: Low
The consumers rely heavily on the nutrition products regularly to keep fit.
Rivalry among Competitors: HIGH
Price-based competition plays a significant role in vitamin and mineral supplements
Competitive and fragmented industry. The four largest nutrition supplement company only cover 15% market share.

13. Company Overview
2.58bn
Revenue in USD (TTM)
264.80m
Net income in USD
2007
Incorporated
6.00k
Employees
Global specialty retailer of health and wellness products
Three segments: Retail, Franchise and Manufacturing
Franchise stores are located in the United States and 54 international countries
Manufactures the majority of its branded products, but also merchandises various third-party products.
It sells products through a worldwide network of more than 8,100 locations
Mergers & Acquisitions
Acquired company:
A1 Sports Ltd
Deal status: Completed
Date: 02 Oct 2013
GNC: NYQ since announced: +4.71%
Source: k Page 7

14. Revenue by Segment/Product
U.S. Retail Revenue by Product* 
includes domestic retail and GNC.com, but excludes LuckyVitamin.co
Source: k Page 8

15. SWOT Analysis Strengths Weaknesses Opportunities Threats
Leading Market Position
Broad Product Offerings
Multi-channel business model
Reliance on Domestic Market
Legal Proceedings
High indebtedness
Opportunities
Threats
Increasing online spending in the US
Strategic Agreements
Increasing obesity among Americans
Increasing Competitive Pressures
Uncertain R&D Outcomes
Stringent regulations
Increasing labor costs in the US

16. Company News
GNC has linked a 15-year lease on 342,000 square feet in a 600,000-square-foot warehouse- and-distribution center in Anson business park.
GNC Holdings, Inc. Announces $500 million Share Repurchase Authorization, Term Loan increase and repricing.
Reaffirms its decision to develop a speculative building
Reaffirms its commitment to consistently return capital to shareholders
Reinforces its confidence in the fundamental strength and long- term prospects of the business
GNC expects to begin operations in the regional distribution center in the fourth quarter of The facility will be one of the company’s four distribution centers for national operations
Source: Source: Indianapolis Business Journal

17. Management Outlook
World-class management team with a proven track record. 
Highly experienced and talented management team has a unique combination of leadership and experience across the retail industry. Team has successfully executed on key growth initiatives while effectively managing the business in a difficult economic environment.
Source: k Page 7

18. Financial Analysis Healthy ratios Steadily improving profitability
High operating leverage
NOTE: The years above refer to the fiscal years ending on Dec 31

19. Financial Analysis Healthy and improving ratios
NOTE: The years above refer to the fiscal years ending on Dec 31

20. Comparable Companies
Source: Yahoo Finance

21. Stock Performance
Source: Yahoo Finance

22. Stock Performance
Source: Yahoo Finance

23. Discount Rate
Source: Yahoo Finance

24. DCF Analysis

25. Decision Drivers Strengths Concerns
Leading market position (10 times larger store base than 2nd player)
New product line potential (sports nutrition, pet, etc.)
High operating leverage with certain top line growth
International expansion potential
Concerns
Stringent regulation
Price competition
Quickly changing consumer behavior

26. Recommendation Valuation Summary Recommendation: Current price: $58.16
DCF result: $66.10
Comps result: $60.76
Recommendation:
Buy 100 shares at market, with an estimated total cost of $5816

27. Questions?