GNC Files for Bankruptcy, Plans to Close Down: Reasons and Lessons for Businesses


General Nutrition Centers Holdings (GNC), a household name in the vitamins and nutrition chain sector, was founded in 1935 in Pittsburgh. GNC has filed for Chapter 11 bankruptcy protection with the Securities and Exchange Commission (SEC) this week Tuesday. Right now, GNC plans to close up as many as 1,200 stores. They have, however, showed their inability to manage the stores optimally. This is about 24% of their entire store network. Since the outbreak of the novel pandemic – Coronavirus, a lot of companies have filed for bankruptcy. This is not unusual, as a lot of establishments are currently facing acute cash crunch due to lack of business. This particular one, however, is unique as GNC has been struggling for years to shore up its profitability and general business. This article will look at reasons why GNC filed for bankruptcy and hope other businesses see lessons to learn from them.



In its bankruptcy filing, GNC said it had both assets and liabilities between $1 billion and $10 billion. Annual revenue fell 12 percent last year to $2.07 billion, though.

Over the past years, GNC has rallied to pay down almost $1 billion in debts, while still in a continuous downward spiral of loss. The company reported a whopping $200 million loss in the January – March quarter of 2020.

GNC Bankruptcy Filing: Reasons and Lessons for Businesses

Failure to Diversify Operations

As GNC files for bankruptcy, let’s look at a hypothetical situation. ‘Company XYZ’ is an established manufacturer of ‘Product A’, and they have full capacity and resources to manufacture ‘Product Aa’ – that is a really close low-hanging fruit. ‘Company XYZ’ ignores all the extra beneficial opportunities that could come with ‘Product Aa’ simply because the field poses some challenges. This myopic business model suffers whenever a major mishap occurs in its main line of business.

Years back, GNC was dubbed the “best for muscle-building formulations”. One of the best in the industry, they had clinched it. Good. Other aspects such as wellness products, natural health solutions, and nutrition products were, however, basically left in the shadows by the company. This is a common mistake amongst most companies. 

Companies must be able to continually scout for opportunities in neighbouring fields, draw a prudent and cost-effective start-up plan, and exploit. Imagine if GNC had taken the production of natural health, nutrition, and wellness products seriously. These products are very popular among baby boomers, as posited by David Silverman, a senior director at Fitch Ratings.


As sales, revenue, and profits begin to spiral downwards during late-2016, the company’s top executives also began to borrow. They used a large chunk of the credit borrowed to buy back shares of its stock, this only ensured that they fell deeper in the pit of debt.

Before filing for bankruptcy, GNC was due to pay up over $600 million in debt repayments in the coming eight months. These debts ate up all of the company’s $219 million in profits in 2015 and condemned them to a $286 million loss in 2016 – just 1 year later. 


Silverman continued, “there are typically two reasons for bankruptcy filings – you either run out of cash or you are unable to meet up upcoming debt obligations, and this (GNC filing) was the latter”. Silverman, who was never a fan of the company’s credit ratings, said in March that “GNC had liquidity, so it was able to manage the COVID-19 crisis fairly well, but it was facing significant maturities that it was unable to meet”.

This points out the dismal state of the company’s finances. Last Wednesday, GNC closed at a meager 61 cents per share, this is a company that once sold at $61 in the same market. This news that GNC files for bankruptcy is really now so surprising.

Inability to Key into E-Commerce

In 2020, GNC still has over 30% of its stores inside Rite Aid pharmacies. This is the same year that witnessed full-blown lockdown due to Coronavirus and all forms of physical business grind down to a complete halt. The advent of this lockdown paved the way for e-businesses, though. This is because the number of people who started shopping online during this period skyrocketed by three times. 


Other outfits like Target, CVS, Walmart, and Costco started to gain market share because of their own incredible and responsive online presence. This, alone, chipped off GNC’s supposed dominance as shoppers tended more towards Amazon and the likes for quality health and wellness products. 

As mentioned in one of our articles, the INTERNET is the enabler of the new model of businesses. Whoever does not key to the opportunities it presents will fall out of business.

Coronavirus (COVID-19) Pandemic

No doubt, the outbreak of the novel pandemic – COVID-19  was also culpable in the downfall and eventual filing for bankruptcy of GNC. Right from late March 2020, the world had been on a complete lockdown till June when some countries began to ease movements gradually. This has only helped companies that had online offices who are remotely efficient. 

The Coronavirus ensured that the world population fell back in their homes are did everything from the coffers of their phones, computers, and tablets. The online-sphere received a boom, but GNC weren’t in it. No surprise GNC files for bankruptcy.

GNC –  General Nutrition Centres –  was no exception to companies hit by the number of companies hurt by this unfortunate pandemic. Honestly, there was little to be salvaged by the top management here.

Decline in Sales/Profit

When your hitherto loyal clients start to move to competition because of ease of business, and you refuse to tweak your business model despite your dwindling hold on the market share, you will surely be selling to a few less people in the nearest future. This has been the case with GNC as far back as 2015.

Just last month, the company warned that its shut offices might never be reopened. This is to reveal that their balance sheet is no longer efficient enough to bear the running cost any longer.

GNC did not diversify into other similar fields to maximize profits and grounds, they did not allude a buoyant online presence, worst of all, decided to keep borrowing incessantly. 

These led to an unforgiving downward spiral for them in sales and profit.

Observed Disloyal Top Executives

Days before the Chapter 11 filing, the GNC paid close to $4 million in bonuses to its top executives. This was revealed via a close study of its company document received by SEC. Of this, nearly $2.2 million was paid to the CEO/MD Kenneth Martindale, the CFO was paid a whopping $795,000 while three other top executives received a combined $918,000. This means only 5 people took the $4 million, and now, speculations suggest that they might be looking for a credible buyer.

Industry observers sense a ‘jump ship’ situation here. This means as GNC files for bankruptcy, the top executives are living their best lives. A company should be run by executive directors and presidents who regard the business as their utmost priority.

The ‘bonuses’ were paid on June 18, barely a week before the bankruptcy filing. These top executives will have to return 25% of their net bonuses if GNC does not emerge from Chapter 11 Bankruptcy protection within a year.

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