General Nutrition Centers Inc. will need a rebuilding year to recover from internal and external problems, according to the executive chairman of the Pittsburgh vitamin retailer, which yesterday reported fourth-quarter sales fell 9.7 percent in existing domestic company stores and 10.6 percent in domestic franchises.

Robert J. DiNicola, who took over in December as interim chief executive officer, said GNC may have responded less nimbly than its competitors to recent market shifts in low-carbohydrate trends and other diet products because the organization was distracted by ownership changes and a failed attempt to take the company public last year.

GNC reported a 12.3 percent drop in revenue from $343.7 million for the three months ended Dec. 31, 2003, to $301.3 million in the same period in 2004. The company posted net income of $2 million for the most recent quarter, vs. last year's $7.5 million loss.

For the year, the vitamin retailer's revenue fell 5.9 percent from $1.429 billion in 2003 to $1.345 billion last year.

Officials blamed the declining sales mainly on lower diet supplement sales, although the closing of 106 underperforming U.S. stores also slightly reduced the company's base. GNC has 2,642 company stores in the United States and Canada, 1,290 domestic franchise sites, and more than 1,000 stores within Rite Aid drugstores.

The financial results did not account for a deal signed late Thursday to transfer franchise rights in Australia to a company that already operates General Nutrition franchises in the Asian Pacific region. GNC expects to collect $4.375 million in the deal. In addition, the company is among the many retailers reviewing its lease accounting based on new federal regulations.

DiNicola, who said a search for a permanent CEO continues to look at both internal and external candidates, vowed to change the retailer's reputation as a place that sells overpriced products. Earlier this year, the company began trimming prices on key items and rolled out new TV advertising.

GNC has depended too long on getting high profit margins even if sales volumes are low, despite an explosion of competition in the vitamin business, DiNicola said. In addition, he said, the company scared off top suppliers with a cumbersome bureaucracy and practices such as pricing products differently for certain markets.

The rebuilding year will include reviewing the organizational structure for efficiency and on improving relationships with both franchisees and suppliers, DiNicola said.