S&P affirms General Nutrition Centers

Standard & Poor's said it affirmed General Nutrition Centers Inc.'s B corporate credit rating, B+ senior secured debt rating, B- senior unsecured debt rating, CCC+ subordinated debt rating and CCC preferred stock and removed the ratings from CreditWatch, where they were placed with positive implications on June 19.

The outlook is stable.

S&P said the affirmation reflects the withdrawal of the company's planned initial public offering which, if completed, could have resulted in an upgrade. The stable outlook reflects General Nutrition Centers' improved operating performance for the past three quarters due to solid comparable-store sales growth and better margins. With better cash flow, total debt to EBITDA (adjusted for operating leases) declined to 5.6x at June 30 from 6.5x at Dec. 30, 2005.

Despite General Nutrition's position as a large player with a worldwide network of more than 5,800 locations, however, the company remains vulnerable, according to the agency. The nutritional supplements industry is very fragmented and General Nutrition Centers faces significant competition from other specialty retailers, drugstore chains and mass merchants, as well as independents. The company's products are also subject to negative publicity, which could affect sales.

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