GNC: Leading Global Health Retailer Analysis

1. 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: 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: 2013 research. Stlouisfed.org

7. Nutritional Supplements Industry Key Statistics: • Market size: 35 billion • Annual growth: 5.7% for 2008-2013 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

9. Nutritional Supplements Industry Key to Success:

10. Industry Forces Analysis

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: 2012 10k Page 7

14. Revenue by Segment/Product Revenue by Segment  U.S. Retail Revenue by Product*  includes domestic retail and GNC.com, but excludes LuckyVitamin.co Source: 2012 10k Page 8

15. SWOT Analysis

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 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: 2012 10k 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 • 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 • 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?