GNC Holdings Inc. Harbin Pharmaceutical Group Holding Co. When it announced plans to file for bankruptcy, GNC said it intended to close between and 1, stores. The company was founded in by David Shakarian, who during the Great Depression established a little health food store called Lackzoom at Wood St.
The store specialized in yogurt and sold other healthy foods such as honey, grains and healthy sandwiches. The company survived the St. Shakarian met the growing demand by opening stores in other states and changed the name of his chain to General Nutrition Centers.
A spokesman for GNC could not be reached for comment Friday. The agreement filed in bankruptcy court Thursday does not address the fate of the GNC stores which remain open, but places the burden of filing federally required WARN notices for layoffs or closings on Harbin. Last year it brought on advisers to help find relief for its balance sheet.
In March, before the COVID crisis was at full tilt, the company said it likely wouldn't be able to generate enough cash to pay on a group of notes coming due. The company, according to internal memos obtained by Retail Dive in March, deemed itself essential because it carried some food and beverage items. Not every state agreed , and several employees told Retail Dive they felt unsafe working the retailer's stores amid the pandemic, in part because the company wasn't providing them with sanitation products or social distancing protocols.
As Tolivar said in her filing, "Although GNC's business was deemed essential in many locations, many municipalities disagreed with this classification, resulting in significant forced closures.
Many of the company's stores are reopened and results are "improving," according to Tolivar. But, she said, GNC does not expect that "the reopening of additional stores will generate near-term revenue that comes close to the Company's pre-pandemic in-store revenue.
The pandemic also derailed the company's effort to refinance its debt, sending it into court for help. GNC has a plan to exit bankruptcy. Actually, it has two plans. In one scenario, it would shed debt and turn itself over to a group of lenders holding a sizable chunk of its debt. GNC also said in a press release that it plans to close to 1, stores — a significant number that would nevertheless leave it with a sizable footprint.
A sale, if it happens, would run through an auction process, which could fetch other prospective buyers and higher bids. A group of bondholders have objected to aspects of GNC's Chapter 11 plans. Specifically they took aim at the retailer's proposed debtor-in-possession financing, which exists to keep companies liquid and operating healthily through the court process.
In part, the group was concerned about how much of GNC's bankruptcy loan rolls up pre-bankruptcy debt by replacing it and, potentially, giving those secured lenders priority treatment through the Chapter 11 process.
But they also expressed worries about the speed of the case, as laid out by the DIP milestones. Despite the contested financing — which a judge approved Thursday over the bondholders' objections — GNC's prospects for exiting bankruptcy are lifted by multiple parties' willingness to take it on as an operating company.
Other retailers that have entered bankruptcy with mere hopes for a suitor or a reorganization plan have not faired nearly as well. That was the case with Pier 1, which ultimately opted to liquidate , and Stage Stores may suffer the same fate in the coming months as well. The brand also has wholesale disruption through Amazon, Target. Other emerging merchandising trends that GNC has leaned into include health and wellness testing kits. Jones said that before the Chapter 11 bankruptcy, GNC had plans to boost its e-commerce and wholesale distribution.
As part of its Chapter 11 restructuring, it will close , stores out of its more than 5, GNC joins a number of large companies, including the retailer Neiman Marcus and the car rental company Hertz , that have filed for bankruptcy since early May. GNC had nearly 5, locations at the end of last year. GNC emphasized in a press release that the company and its remaining stores will continue to be open for business.
The company has been temporarily offering curbside pickup during the pandemic and said it plans to make a "buy-online-pick-up-in-store" option permanent as part of its restructuring. Retail stores face uphill battle during pandemic.
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