Vitamin Shoppe Inc (VSI), GNC Holdings Inc (GNC): Supplement Struggles

Now lets take a look at the company’s huge competitor GNC Holdings Inc (NYSE:GNC), which operates with a very similar business model.

GNC Holdings Inc (NYSE:GNC) is positioned far better for domestic and international expansions, as the company has greater economies of scale than Vitamin Shoppe. GNC Holdings Inc (NYSE:GNC)’s market share has allowed the company to build a better distribution channel and reap the rewards of much higher operating margins(seen above). GNC Holdings Inc (NYSE:GNC) has greatly improved both its wholesale and E-Commerce businesses to meet the demand for supplements. The company is growing its E-Commerce segment at rates above 20%, which far outpaces Vitamin Shoppe Inc (NYSE:VSI). Its very simple in my opinion–the greater the market share, the greater odds of maintaining growth in the years ahead.

Wrap-Up

With a small market share, Vitamin Shoppe Inc (NYSE:VSI) is struggling to maintain its current position and compete with online rivals. As a result, I believe Vitamin Shoppe needs to leverage its balance sheet for further acquisitions and mergers in the future. A merger between Vitamin Shoppe and GNC Holdings Inc (NYSE:GNC) would be interesting for both companies. Similar to the airline industry, companies in the supplement market would benefit greatly from greater economies of scale.

The article Supplement Struggles originally appeared on Fool.com and is written by Nathaniel Matherson.

Nathaniel Matherson has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Nathaniel is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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