Bankrupt GNC to close nearly 1,400 stores, pay CEO a $2 million bonus
GNC, the 85-year old seller of vitamins and dietary supplements, filed for bankruptcy late Tuesday and said it plans to close as many as 1,374 stores, or nearly half of its company-owned locations, in the U.S. and Canada by the end of the year. The ubiquitous retailer had already been planning to close as many as 250 locations prior to the filing.
GNC said the closures will help it cut costs as it attempts to emerge from bankruptcy over the next year and will save the chain from shutting down completely. Its stock price dropped to $0.54 on Wednesday following the bankruptcy news — a long, hard fall from its $49 high back in 2015. In a recent presentation for investors, GNC reported having $96 million in cash and $905 million in total debt.
The retailer also said in a filing Wednesday it had paid CEO Ken Martindale a $2.2 million bonus five days before filing for Chapter 11 bankruptcy protection in a federal court. GNC called the management payouts, which also went to the CFO and other top executives, "retention bonuses." Yet Martindale, who was paid $7.1 million in 2019, will get to keep 75% of the cash bonus even if GNC doesn't emerge from bankruptcy. He joined the company in September 2017.
While controversial, it has become common for companies to award executives retention bonuses when they file for bankruptcy.
GNC's list of store closures is not known. But on Tuesday, the retailer updated a previously disclosed list of stores that are set to be shuttered. The list included 248 locations, including 27 stores in California, the most of any state. GNC will also close 12 stores in Florida, including locations in Miami, Orlando and Tampa, and 11 locations in New York, including three in Manhattan. The list also includes 29 stores in Canada, including 14 in Ontario.
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 5,800 locations at the end of last year. It also sells GNC products in an additional 1,200 Rite Aid locations.
The vitamin retailer had already been struggling before the coronavirus-forced economic shutdown: GNC has lost more than $500 million over the past four years. But the pandemic, which forced the company to temporarily close 30% of its stores, made things worse. In mid-May, the company announced it lost $200 million in the first three months of 2020, up from a loss of just $15 million in the first quarter 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.
