SECURITIES AND EXCHANGE COMMISSION
                              Washington, D.C. 20549
                                     FORM 10-K

               REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 (Mark One)

[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
         OF 1934

         For The Fiscal Year Ended February 6, 1999

                                                                  OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934 [NO FEE REQUIRED]

         For The Transition Period From ______ To _______

                    Commission File Number: 0-19592

                   GENERAL NUTRITION COMPANIES, INC.
         (Exact name of issuer as specified in its charter)

         DELAWARE                                      04-3056351
         (State or other jurisdiction of               (I.R.S. Employer
         incorporation or organization)                Identification No.)

         300 Sixth Avenue,  Pittsburgh, Pennsylvania    15222
         (Address of principal executive office)        (Zip Code)

         Registrant's telephone number, including area code:  (412) 288-4600
 
         Securities Registered Pursuant to Section 12(b) of the Act: None
 
         Securities Registered Pursuant to Section 12(g) of the Act:
 
                     Common Stock-Par Value $0.01
                            (Title of Class)

     Indicate by check mark  whether the  Registrant  (1) has  filed all reports
required to be filed by Section 13,  or 15(d) of the Securities  Exchange Act of
1934 during the  preceding  12 months,  and (2), has been subject to such filing
requirements  for the past 90 days.  [x] Yes [ ] No  Indicate  by check  mark if
disclosure of delinquent  filers pursuant to Item 405 of  Regulation S-K  is not
contained  herein,  and  will  not be  contained,  to the  best of  Registrant's
knowledge,  in  definitive  proxy  or  information  statements  incorporated  by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [ ]
Yes [ ] No

As of April 29, 1999,  67,856,738  shares of the Registrant's  Common Stock were
outstanding.   The   aggregate   market  value  of  the  voting  stock  held  by
non-affiliates  as of that date was  $1,080,008,446  based on the last  reported
sale price of the Common Stock on the NASDAQ Stock Market.

                                        DOCUMENTS INCORPORATED BY REFERENCE:
         Incorporated by
Document                                          Reference in Document Part No.
Portions of General Nutrition Companies, Inc. Proxy
  Statement for its 1999 Annual Meeting of Stockholders                  III

                                                  TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                                                 Page


<S>     <C>    <C>    <C>    <C>    <C>    <C>
                                                                                                               ----------

Part I
  Item 1.           Business                                                                                        3
  Item 2.           Properties                                                                                     12
  Item 3.           Legal Proceedings                                                                              12
  Item 4.           Submission of Matters to a Vote of Security Holders                                            12

Part II
  Item 5.           Market for the Registrant's Common Equity and Related Stockholder Matters
                                                                                                                   13
  Item 6.           Selected Consolidated Financial Information and Other Data                                     14
  Item 7.           Management's Discussion and Analysis of Results of Operations and Financial Condition
                                                                                                                   15
  Item 8.           Financial Statements and Supplementary Data                                                    22
  Item 9.           Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
                                                                                                                   43

Part III
  Item 10.          Directors and Executive Officers of the Registrant                                             44
  Item 11.          Executive Compensation                                                                         46
  Item 12.          Security Ownership of Certain Beneficial Owners and Management                                 46
  Item 13.          Certain Relationships and Related Transactions                                                 46

Part IV
  Item 14.          Exhibits, Financial Statement Schedules and Reports on Form 8-K                                47

Signatures                                                                                                         50
</TABLE>



                                                                PART I

ITEM 1.  BUSINESS

     General Nutrition  Companies,  Inc. (the "Company"),  collectively with its
subsidiaries,  is the only nationwide  specialty retailer of vitamin and mineral
supplements, sports nutrition products and herbs, and is also a leading provider
of  personal  care,  and other  health-related  products.  At  February 6, 1999,
domestically,  the Company's  products were sold primarily through 3,757 General
Nutrition  Centers(TM) and GNC Live Well(TM) stores ("GNC"),  of which 2,531 are
owned and operated by the Company and 1,226 are franchised. Internationally, the
Company  operates  19  Health  and  Diet  Centres(R)  and 24  General  Nutrition
Centres(R) in the United Kingdom, 92 General Nutrition  Centres(R) in Canada and
3 stores in New Zealand.  There are also 196  operating  franchise  stores in 25
international   markets.   The  Company's  marketing   emphasizes   high-margin,
value-added vitamin and mineral supplements, sports nutrition products and herbs
sold under the Company's GNC proprietary brands and other nationally  recognized
third-party brand names.

     The  Company's  strategy is to increase  its market  share in the  vitamin,
mineral  and  supplement  market  and to  leverage  this  increase  to  maximize
profitability.  The Company  strives to achieve  these goals  through:  (i) unit
growth,   with  the  addition  of  company-owned   and  franchised  stores  both
domestically and internationally, and through a strategic alliance with Rite Aid
Corporation  to open a minimum of 1,500 GNC(R) stores  within Rite Aid locations
over a three year period;  (ii) enhanced  performance at existing  stores,  with
comparable  store sales gains driven by advertising,  new product  introductions
and updated store formats;  and (iii) improved  profitability  through increased
introduction of GNC proprietary  branded  products,  and increased  economies of
scale.

     Set forth below is the Company's net revenue,  operating earnings,  diluted
earnings per common share and store information for years 1994 through 1998.
<TABLE>
<CAPTION>

                                                            Company Growth

                                       1994                  1995               1996               1997              1998
                                   ----------------    -----------------    --------------     --------------    ----------------
                                      (52 weeks)           (52 weeks)         (52 weeks)         (52 weeks)         (53 weeks)

                                                           (Dollars in thousands, except per share data)

<S>                                <C>                 <C>                  <C>                <C>               <C>        
Net revenue                        $    672,945        $     845,952        $  990,845         $1,193,485        $ 1,417,746
Operating earnings                       97,750              137,116            60,347            191,171            183,337
Diluted earnings per share                 0.44                 0.78              0.05               1.24               1.18
Operating earnings as                                                                           
  adjusted*                              98,425              138,699           152,413            195,254            194,548
Diluted earnings per
  share as adjusted*                       0.54                 0.79              0.95               1.27                1.28
Total number of stores                    2,115                2,543             3,047              3,435               4,091
Comparable store sales
  (GNC stores)                              5.8%                10.3%              0.3%               7.9%               -0.2%
</TABLE>


     *  Operating  earnings  and  earnings  per  share  have been  adjusted  for
comparative purposes,  excluding non-cash compensation  expenses,  extraordinary
items, restructuring, and non-recurring charges in all years presented.

     Unit Growth.  Since 1992,  the Company has opened or acquired in the United
States 2,593 new GNC stores,  net of closings,  of which 1,522 are company-owned
and 1,071 are  franchised  locations.  The Company's  initial growth was through
company-owned stores located primarily in regional malls. Beginning in late 1992
the Company broadened its location  selections to include strip shopping centers
and secondary malls as well as regional malls. The Company's  franchise  program
has also enabled the Company to expand into secondary  locations as well as into
international  markets. In 1998, the Company opened 561 new domestic GNC stores,
of which 409 are  company-owned  and 152 are  franchised.  In 1998,  the Company
opened  58 General  Nutrition  Centres in Canada  and 5 in the  United  Kingdom.
Additionally,  45  franchise  stores  opened in various  international  markets.
Additional  store growth is expected in 1999 as the Company  continues its store
expansion  program for  company-owned  and  franchised  locations as well as the
addition of approximately 350 stores within Rite Aid locations.  In Franchising,
at February 6, 1999,  there were awards and  development  agreements  to open an
additional 323 domestic and 428 international  franchise  locations.  Comparable
Store Sales. During 1998, comparable store sales were down 0.2% in company-owned
GNC locations and increased  6.9% in franchise  GNC  locations.  The  comparable
store sales  decrease at  company-owned  GNC  locations  was driven by decreased
margins due to the Company  revising its pricing  strategy,  lowering  prices on
branded sports products and certain  commodity  vitamins,  a slowing of the herb
category  sales  as  strong  publicity  and a media  campaign  in 1997  were not
repeated in 1998,  and the mass channel  accelerating  their  expansion into the
market as well as new large  companies  entering into the market.  The Company's
plans to increase  comparable store sales include the continued  introduction or
reformulation  of value  added  specialty  branded  products  supplemented  with
increased  marketing;  product pricing  adjustments to improve unit movement and
the  ongoing  refinement  of  its  store  presentation.  In  1998,  the  Company
introduced 243 new or  reformulated  proprietary  branded  products and plans to
introduce  more than 45 additional  products in 1999.  The Company  continues to
focus  on  creating   updated   store  formats  that  provide   consumers   with
informational  displays  and  signage  in an  attractive  shopping  environment.
Historically,  when the store formats are updated, comparable store sales in the
first year after conversion are higher than in those stores not converted.

     Set forth below for the periods  presented,  are comparable store sales for
company-owned and franchise stores in the United States. 

<TABLE>
<CAPTION>

                                                 Comparable Store Sales

           Stores                    1994                1995                1996              1997             1998
----------------------------    ----------------    ----------------    --------------     -------------    -------------

<S>                                    <C>                <C>                 <C>                <C>              <C> 
Company-owed                           5.8%               10.3%               0.3%               7.9%            -0.2%
Franchise                             19.0%               15.5%               8.5%              16.4%             6.9%

</TABLE>

     Enhanced  Profitability.  The Company  continues to focus on improving  its
profitability  by attempting to shift its mix to  proprietary  branded  products
that  typically  yield  higher  profit  margins.  In  addition,  as the  Company
continues  to  grow,  it  expects  to  further   leverage  its   investments  in
manufacturing,  distribution,  purchasing  and  marketing  and benefit  from its
vertical integration.

     The  Company  operates  in  three  distinct  business   segments;   Retail,
Franchising and Manufacturing/  Wholesale.  For financial information concerning
segments, see Note 16 of Notes to Consolidated Financial Statements.

RETAIL

Products

     The Company's products are sold under its various  proprietary brand names,
including   Ultra   Mega(R),   Solotron(R),   GNC(R),   Natural   BrandTM,   Pro
Performance(R), ChallengeTM, Herbal Plus(R), Nature's Fingerprint(R), Preventive
Nutrition(R),   Optibolic(R),   Bio-Remedy(R),   Harvest  of  NatureTM,  Orchard
Blends(R),   and  Opti-Body(R).   In  addition,   the  Company  carries  various
third-party   brand  name  products   including   WeiderTM,   Advanced  Research
Products(R),  Twin  Lab(R),  Nature's  Herbs(R),  Nature's  Way(R),  EAS(R)  and
Met-Rx(R).  The Company's  product mix focuses on  high-margin,  GNC proprietary
branded,  value-added  products  emphasizing  vitamin and  mineral  supplements,
sports nutrition and herbal products.

     Vitamin and Mineral  Supplements.  For over  63 years,  vitamin and mineral
supplements  have represented the core of the Company's  product line.  Vitamins
and minerals are sold in single vitamin and multi-vitamin form, and in different
potency  levels.  Products are produced in tablets,  soft gelatin and hard-shell
capsules and powder  forms.  The Company has  reformulated  many of its existing
private label  products and added new  "consumer  focused"  special  nutritional
formulas  to its  line  of GNC  proprietary  branded  products.  These  new  GNC
proprietary  branded  products  are  designed to meet the  customers'  lifestyle
requirements.  They have unique  formulations  based on the most recent science,
and  therefore  can  command  a  premium  for  these  high  value-added  special
nutritional   formulas.   The  Company  places   continued   emphasis  on  these
high-margin,  value-added  special  nutritional  formulas  for its  vitamin  and
mineral products sold under its GNC proprietary brand names.

     Sports Nutrition  Products.  Sports nutrition products are food and dietary
supplements  designed  to be  taken  in  conjunction  with  a  fitness  program.
Management  believes  that these  products,  which include  various  protein and
weight gain  powders,  sports  drinks,  sports bars,  and high  potency  vitamin
formulations, appeal to consumers who are engaged in regular exercise, including
athletes who are in training to gain weight and develop their physique. Over 200
different  sports  nutrition  products,  including the Company's GNC proprietary
brands and national brands, are stocked by the average GNC store.

     Herbs. The herb category has been one of the fastest growing  categories of
the supplement market over the past five years.  Herbal  supplements are sold in
various hard-shell and soft gelatin capsules,  tea and liquid forms. The Company
has consolidated its traditional herbal offerings under a single umbrella brand,
Herbal  Plus(R).  Within  the Herbal  Plus line,  there are four tiers of herbs;
Fingerprinted,  Concentrated, Standardized and Full Spectrum. In addition to the
Herbal Plus line, the Company also offers a line of whole food based supplements
under the Natural  Brand(TM) label, a line of proprietary teas under the Harvest
of  Nature(TM)  brand as well as many well know third party  products  including
Nature's Way(R), Kyolic(R) and Ginsana(R).

     Diet Products.  The diet category  consists of various formulas designed to
supplement the diet of weight  conscious  consumers.  These products are sold in
various  pills,  teas and meal  replacement  drinks.  The Company  provides  GNC
proprietary brand products along with third-party products.

     Food Products.  The Company sells a selection of specialty food products in
its GNC stores. As commodity natural food products have become available through
more distribution  channels,  the Company has reduced its line of food products,
focusing more on  proprietary  branded  health  related snack items that carry a
higher  gross  margin.  This  category  has  been  de-emphasized  as part of the
Company's  ongoing  reallocation  of  shelf  space to  higher-margin,  specialty
non-food products.

     Personal Care and  Miscellaneous  Health Care  Products.  The Company sells
personal  care  products  including  hair care  products,  soaps,  skin  creams,
lotions,  bath  and  massage  products.  These  products  are  generally  termed
"natural"  because they  contain few  synthetic  chemicals  and  additives.  The
Company seeks to offer products  within this category,  which include  vitamins,
herbs and other  natural  ingredients  and avoids  products  that contain  harsh
chemicals.

     Gold Card/Other.  This category primarily represents sales of the Company's
Gold  Card.  The card,  for a $15  annual  fee,  provides  customers  with a 20%
discount on all products  purchased,  both on the date the card is purchased and
the first Tuesday of each month. At February 6, 1999,  there were  approximately
3.5 million active Gold Card members.

     The  following  table  is a  comparison,  for  the  last  three  years,  of
company-owned GNC retail sales in each of its major product categories and their
respective percentage of total GNC retail sales:

<TABLE>
<CAPTION>
                                             1996                              1997                            1998
                                ------------------------------    -----------------------------    ----------------------------
                                          (52 weeks)                        (52 weeks)                      (53 weeks)

                                                   % of Total                       % of Total                       % of Total
                                                      Sales                            Sales                           Sales
                                     Sales                            Sales                            Sales
                                --------------    ------------    -------------    ------------    ------------     -----------
                                                                      (sales in millions)

<S>                               <C>                    <C>        <C>                   <C>        <C>                  <C>
Vitamins & Minerals               $   233                35%        $   275               35%        $   313              34%
Sports Nutrition                      182                27             212               27             279              30
Herbs                                 129                20             161               21             162              18
Diet Products                          39                 6              55                7              67               7
Food Products                          18                 3              17                2              21               2
Personal Care                          26                 4              25                3              34               4
Gold Card/Other                        35                 5              35                5              49               5
                                --------------    ------------    -------------    ------------    ------------     -----------

                                  $   662               100%        $   780              100%        $   925             100%
                                ==============    ============    =============    ============    ============     ===========
</TABLE>


     Sales of the Company's GNC  proprietary  brands  represented  approximately
54%, 52% and 51% of the total retail sales in 1996, 1997 and 1998, respectively.
Sales of proprietary  branded  products  continued to increase in 1997 and 1998,
although at a lessor  percentage  to total sales than certain third party sports
nutrition products.

Stores

     At February 6, 1999, the Company operated a network of 2,669 retail stores,
of which 2,530 were located in the United States and Puerto Rico,  135 stores in
the United  Kingdom and Canada and 3 in New Zealand.  The  following  table sets
forth the number of retail stores and the respective  operating names at the end
of the fiscal years 1996, 1997 and 1998.

<TABLE>
<CAPTION>

         Number of Company-Owned Stores Operating at Year End
-----------------------------------------------------------------------

<S>                                                                <C>                   <C>                   <C> 
Operating Name                                                     1996                  1997                  1998
------------------------------------------------------      -----------------      ----------------      ----------------


Domestic
    General Nutrition Centers                                       1,760                 2,086                 2,496
    Nature's fresh                                                      6                     6                     6
    Other                                                              67                    44                    29
                                                            -----------------      ----------------      ----------------
        Total domestic stores                                       1,833                 2,136                 2,531
International
    General Nutrition Centres                                          20                    54                   119
    Health & Diet Centres                                              20                    20                    19
                                                            -----------------      ----------------      ----------------
        Total international stores                                     40                    74                   138
                                                            -----------------      ----------------      ----------------

Total Company-owned stores                                          1,873                 2,210                 2,669


                                                            =================      ================      ================
</TABLE>
 
     General Nutrition Centers.  Most GNC stores contain between 1,200 and 1,800
square  feet.  Historically  these GNC  stores  were  constructed  primarily  in
regional shopping malls ("Traditional"). Beginning in late 1992, the Company, as
part of its store  expansion  strategy,  focused its growth on strip centers and
secondary mall locations  ("Expansion")  rather than the Traditional mall sites.
While  similar in sizes and profit  margins,  the strip center  stores  generate
fewer  customer  transactions  and therefore  have lower annual sales volume and
sales per square foot. The following table sets forth for the periods indicated,
the weighted  average sales per store and sales per square foot for  Traditional
and Expansion GNC stores which have been open at least one full year.

<TABLE>
<CAPTION>

                                   Weighted Average Sales Per Store and Sales Per Square Foot
-------------------------------------------------------------------------------------------------------------------------------
                                                        (sales in thousands)

                                                  Traditional                                        Expansion
                                -----------------------------------------------    --------------------------------------------

                                     1996             1997             1998            1996            1997             1998
                                --------------    ------------    -------------    ------------    ------------     -----------

<S>                                   <C>               <C>             <C>              <C>             <C>            <C>  
Number of Stores                      836               826             812              878             910            1,203
Sales                             $   530           $   560        $    567          $   300         $   317          $   326
Sales per Square Foot             $   324           $   342        $    346          $   199         $   211          $   221
</TABLE>

     Updated Store  Formats.  In 1999, the Company will begin to rollout its new
concept store  format.  The store design  consists of two formats,  one for mall
locations and one for strip center  expansion.  The new store format presents an
upscale  fixture  design  consisting of wood veneer  finishes  combined with the
latest lighting concepts.  In addition,  all store graphics have been redesigned
to better  identify  with the GNC customer and provide  product  information  to
allow the consumer to make educated  decisions  regarding  product purchases and
usage. Product lines within the stores will be reset to focus customer attention
to premium  quality  formulations  and high demand  private label  products that
reach all customer  demographic  profiles.  Product  labeling will be consistent
within product lines and the store will present a unified  approach to packaging
with emphasis on added information for the consumer.

     All changes are intended to make for a better  shopping  experience for the
customer from aesthetics to product  assortment and availability of information,
while promoting the new GNC theme, "The GNC Difference". Going forward, this new
format  will be used by the Company in all new store  construction.  The Company
will continue to evaluate and modify its store formats to maximize  productivity
and profitability.

     Store Management.  The Company's GNC stores are currently regionalized into
four  divisions.  Each  division  is led by a Vice  President  who,  along  with
managers responsible for merchandising and promotions, a Financial Analyst and a
network of Regional Sales Directors,  manages  company-owned  store  operations.
This  decentralized  organization  has been in  existence  for  over ten  years,
allowing the Company's field  management to customize stores to the demographics
of particular  markets and to have  responsibility  for merchandise  assortment,
promotions,  certain advertising and product pricing. The divisions also provide
operational  support to the franchisees  through a network of field  operational
consultants.

     Nature's Fresh.  In 1996, the Company  acquired  Nature's fresh  Northwest,
Inc.; a 6-store  gourmet  grocery store chain  located in the  Portland,  Oregon
area. These stores offer a broad assortment of natural produce,  meat,  poultry,
and seafood as well as vitamins and health and beauty aids.  The stores range in
square  footage from 4,500 to 46,000  square feet.  The Company plans to open an
additional  three stores during 1999.  Please see the subsequent  event note for
additional information related to Nature's fresh.

     Amphora.  In 1996, the Company acquired Amphora; a one-store retail concept
offering  aromatherapy based bath, body, and relaxation  products.  During 1998,
the Company made a strategic  decision to refocus on its core  business  and, as
such, the Amphora concept was discontinued  and the Company  recognized a charge
of $3.3 million during the fourth quarter.

     General Nutrition Centres.  In 1996 the Company opened 10 stores in Canada,
9 stores  in the  United  Kingdom  and 1 store in New  Zealand,  to test the GNC
retail concept in these international  markets.  The Canadian stores have proven
to be successful with 92 operating stores at February 6, 1999. The Company plans
to open an additional 50 Canadian stores during 1999. The United  Kingdom,  with
24 stores  open,  continues to be evaluated  for future  growth.  The GNC retail
concept in New Zealand was  discontinued  which resulted in the Company taking a
charge of $.3 million during the fourth quarter of 1998.

     Health and Diet Centres.  In 1995,  the Company  purchased  Health and Diet
Centres, a 20 store health retail chain in the United Kingdom.  The stores offer
products  similar  to that of a GNC  store  with a greater  mix of  health  food
products and fewer proprietary branded products.  The Company introduced certain
of the  Company's  proprietary  branded  products in Health and Diet  Centres in
1996.

Marketing

     Trends.  The Company's  current  marketing and store expansion efforts have
resulted in approximately a 12.9% share of the total retail  supplement  market,
including  the  vitamins,  minerals,  herbs,  and sports  nutrition  categories,
compared with 10.8% in 1994.

     According to various sources, including Packaged Facts and Beyond Data, the
retail  supplement market in which the Company competes is forecasted to grow at
an  accelerating  rate  (15.7%,  12.6%,  and  13.8% in  1999,  2000,  and  2001,
respectively),  reaching  $11.6 billion  by 2000 and $13.2 billion by 2001. This
growth is driven by a combination of an aging population and increased  consumer
acceptance of  supplements.  For example,  people over age 35, which account for
73% of vitamin users,  will grow from 127 million in 1995 to 150 million  people
in the U.S. alone by the year 2005.  Meanwhile,  between 1993 and 1998, usage of
vitamins grew from 36% of the population to 45%; usage of herbs grew from 14% of
the population to 37%, and 5% of US households  used sports  nutrition  products
during 1998. The overall alternative medicine category grew at an average of 30%
versus 8% for  conventional  medicine from 1989 to 1993, the last year for which
statistics are available.

     The Company markets its proprietary brands of specialty  nutrition products
through an integrated  marketing  program  whose  executional  elements  include
television,  print and  radio  media,  storefront  graphics,  Gold  Card  member
communications,  and point of purchase  materials.  The Company further benefits
from product  advertising  paid for entirely by third-party  vendors,  promoting
their products and identifying GNC stores as a place to purchase these products.
In 1998,  the Company spent $62.6  million on domestic  retail  advertising  and
other marketing efforts,  or approximately 6.1% of retail net revenue,  compared
with $47.6 million, or approximately 5.5% of retail net revenue in 1997.

     Additionally,  the Company's franchisees currently are required to spend up
to 3% of sales on local  advertising  and may be required to contribute up to an
additional 3% of their retail sales to a fund utilized for national advertising.
In 1995, the Company began setting up co-op advertising funds with participating
franchisees  in major markets.  These co-ops  require  franchisees to contribute
2.5% of sales to the fund while the Company  contributes  the same percentage of
sales for company-owned  stores in the market.  This permits the Company to pool
its own funds with those of its franchisees to advertise in a more effective and
cohesive way.  Total dollars  spent in 1998 by the co-op was $24.4  million,  up
from $17.0  million in 1997.  There were 60 co-ops in place at February 6, 1999.
No additional co-op formations are anticipated in 1999.

     Advertising.  The Company remains committed to positioning the GNC Brand as
the customer's  inspirational  partner in living his or her best life. The "Live
Well" positioning is communicated  through a consistent and integrated  approach
to television, radio and print, creative media placement, in-store graphics, and
other promotional materials.  The Company has made substantial gains in customer
perception and credibility, which management believes are a direct result of the
"Live Well" market  positioning and executions.  In 1999, the Company launched a
new campaign to further  enhance GNC's premier  positioning in the market.  This
campaign entitled "The GNC Difference", features ten unique points of difference
that illustrate how GNC stands out from the competition. The ten featured points
of  difference  are  promoted  via  a  series  of  fifteen   second   television
commercials, print and outdoor billboard advertising. Additionally, the in-store
graphics are  modified to  incorporate  "The GNC  Difference",  thus  creating a
comprehensive, integrated message.

     In 1999, the Company  signed an agreement to have Bill  Parcells,  coach of
the New York  Jets,  act as its  spokesperson  for the Pro  Performance  line of
sports nutrition products. A comprehensive  television,  print, radio and direct
marketing  campaign  was  developed  around Mr.  Parcells to generate  increased
awareness and sales for the Pro Performance line.

     Training.  The Company has developed and tested an interactive  touchscreen
kiosk, which disseminates consumer information via an independent service called
the  BioNutritional   Encyclopedia.   The  BioNutritional   Encyclopedia  allows
customers to easily search  through a compilation  of balanced  research on over
150  nutritional  substances.   The  kiosk  also  features  interactive  product
knowledge  training  for  the  store  staff.  Product  training  curriculum  was
developed in electronic  format for the entire  product line and the kiosks were
rolled out to the company-owned stores during 1998.

     Gold Card Program. The Company's Gold Card Program has developed into a key
component of the Company's marketing strategy, with membership as of February 6,
1999 of approximately 3.5 million customers.  The Company believes that its Gold
Card  Program  builds  customer  loyalty  and makes  GNC a  destination-oriented
retailer  for  customers  that  hold a Gold  Card.  Average  sales per Gold Card
customer increases to $50 per transaction on "Super  Tuesday"(the first Tuesday
of every  month),  the day on which Gold Card holders  receive a 20% discount on
all purchases.  The average sale per customer on Super Tuesday is roughly double
the Company's daily average. Gold Card members also receive complimentary copies
of Let's Live  magazine.  The magazine  provides  information  on nutrition  and
health and advertises special in-store promotions.

     The database marketing system for the Gold Card Program allows matching and
analysis of consumer information;  including who they are and what and when they
buy.  During 1999,  the database  system will be used to increase card usage and
member participation rate on Super Tuesdays and during special sales and events,
to sell  more  product  to the most  likely  prospects  based on  proven  buying
patterns,  to reduce  communications costs to non-participating  members, and to
increase Gold Card renewal rates.

     Scientific Studies.  Scientific studies are bringing new credibility to the
supplement  category.  Consumers now list scientific research as the single most
compelling factor in their category  participation and purchase  decisions,  and
well  publicized  new  research  drives  massive  swings in consumer  demand for
clinically  proven  nutritionals.  The  Company's  scientific  affairs  group is
staffed with highly qualified  personnel,  including Ph.D's.  The group combines
high  quality  science  with  GNC  product   developments,   research   support,
information   dissemination  and  regulatory   affairs  to  enhance   scientific
credibility for the Company and its product lines.

Competition

     In the vitamin,  mineral,  and supplement line, the Company has no national
specialty  retail  competitor.  However,  increasingly the Company competes on a
regional basis directly with other specialty  health retailers and also competes
directly with many drug stores,  supermarkets,  and mass  merchandisers.  During
1998,  the Company  revised its pricing  strategy,  adjusting  prices on certain
branded  sports  products  and  commodity  vitamins in  response  to  continuing
competitive pressures from various market segments. The Company has enhanced its
competitive  position  by offering  proprietary  branded  formulations,  a broad
product  assortment and service  provided by its retail sales force. The Company
believes that none of its competitors offers the same level of product selection
and customer service as the Company or benefits to the same extent from national
advertising. The Company believes that, as a specialty retailer, the quality and
selection  of  its  products,   marketing   dollars  spent,   store  appearance,
informative sales force,  convenience,  and consumer  confidence in the GNC name
provides a distinct competitive advantage.

FRANCHISING

     As a means of enhancing the Company's  operating  performance  and building
its store base, the Company,  in mid 1988, opened it's first franchise location.
Since that time, the success of this program has been recognized  numerous times
as one of the top franchise programs in the country including:
 
     1994: Success magazine ranked GNC the number one franchise opportunity in a
survey of over 2,000 franchise operations.

     1995:  Franchise  Buyer magazine  ranked GNC the number one non-food retail
franchise

     1996:  Franchise  Times magazine  ranked GNC the sixth Retail and Specialty
Franchise in the United States.

     1997:  Franchise  Times  magazine  ranked GNC the number one franchise in a
survey of the top 200 franchise businesses in the U.S.

     1998:  Entrepreneur  International and Entrepreneur  Japan magazines ranked
GNC the number one franchise.

     The  Company  generates  revenue and income  from  Franchising  through the
initial  franchise fees, the sale of product at wholesale  prices,  a royalty on
retail  sales and  interest  income on amounts  financed  by the Company for the
initial  purchase of the store's assets and store remodels.  The Company selects
franchisees  that will not only own but also  operate  the  stores.  The Company
believes  that the  consistency  and  customer  service  that an  owner/operator
provides is important  given the  specialized  nature of the  Company's  product
line.  These  franchises  have  demonstrated  that GNC  stores  can be  operated
successfully  in strip center  locations and smaller malls that were  previously
considered secondary real estate by the Company. To assist the franchisee in the
successful  operation of the stores,  the Company  offers a three-part  training
program  which  includes  classroom  instruction,  training  in a  company-owned
location,  and actual  "field"  training  after the franchise  store opens.  The
primary concentration of the training is product education and store operations.
   
     The current  franchise  agreements are effective for a ten-year period.  At
the end of the franchise  agreement the Company has the option to permit renewal
of the agreement for another  ten-year  period at 50% of the franchisee fee that
is then in effect.

     The  following  table sets forth,  for the years  presented,  the number of
operating  franchise  locations  and the number of  franchise  stores  that were
awarded, but were not yet open at the end of each year:

<TABLE>
<CAPTION>
                                             Number of Operating Franchise Locations
-----------------------------------------------------------------------------------------------------------------------------------

                                                1996                              1997                            1998
                                  ---------------------------------  -------------------------------  -----------------------------

      Franchise Locations            Domestic       International      Domestic      International     Domestic     International
--------------------------------  ---------------   ---------------  -------------  ----------------  ------------  ---------------

<S>                                        <C>              <C>           <C>                <C>          <C>                <C>
At beginning of year                       848              111           1,049              125          1,074              151
Added during year                          272               22             252               30            322               46
Closed or converted                         71                8             227                4            170                1
                                  ---------------
                                                    ===============  =============  ================  ============  ===============
At end of year                           1,049              125           1,074              151          1,226              196
                                  ===============   ===============  =============  ================  ============  ===============

Development agreements                                                                                                             
   and stores awarded but                                                                                                          
   not yet open                            259              374             422              387            323              428
</TABLE>

     Domestic.  The Company's current  franchising program is directed primarily
toward existing  franchisees and third parties. New franchisees to the system in
1999 are  required to pay an initial  fee of $32,500  for a  franchise  license,
$27,500 if the  applicant is an existing  GNC  franchise  operator.  The Company
offers  limited  financing to qualified  franchisees  at current fixed  interest
rates of 13.75% per annum  ordinarily  for terms up to five years.  In addition,
for  franchisees  that are  relocating or remodeling  their stores,  the Company
offers  special  financing  arrangements  at interest  rates  between  9.25% and
11.25%.  Once the store is  established,  franchisees  are  required  to pay the
Company a continuing royalty of 6% of sales, to spend up to 3% of sales on local
advertising,  and may be required to  contribute up to an additional 3% of sales
toward a national  advertising fund. Reduced license fees of $10,500 and a lower
initial  royalty  fee of 4%,  5% and 6% for  years 1, 2 and 3 with 6% for  years
thereafter,   respectively,   are   offered  to   independently   owned   health
food/nutrition store owners to encourage them to convert to GNC franchises.

     Franchises  receive  limited  geographical  exclusivity and are required to
carry all of the Company's own GNC  proprietary  brand name vitamins and mineral
supplements. GNC requires owners to operate the stores, and currently limits the
number of stores a franchisee  can own to eight.  Although  franchise  contracts
contain strict  requirements for store  operations,  the Company cannot exercise
the same degree of control over  franchisees as it does over its store managers;
however,  the  Company  does retain the right to approve  vendors  and  specific
products,  and requires  franchisees  to obtain legal  approval of any franchise
advertising.  If a franchisee does not meet specified performance and appearance
criteria,  the Company is permitted to terminate  the  franchise  agreement.  In
these  situations,  the Company may take possession of the location,  inventory,
and  equipment,  and  operate the store as  company-owned  or  re-franchise  the
location.

     International.  A new participant in the Company's  international franchise
program is required to pay an initial fee of $20,000 per store. Upon the store's
opening,  the  franchise is required to pay a continuing  royalty of up to 5% of
sales.  The  Company's  strategy  for  international  franchising  is to grant a
franchise for an entire  country to an entity with  extensive  knowledge of that
country's  business  environment  and adequate  capital for market  penetration.
International  franchised  stores generate sales per square foot comparable with
domestic store locations. However, the Company generates less revenue from these
franchises due to lower international  royalty rates and a smaller percentage of
products  purchased  from the  Company.  In 1998,  the  Company  opened a net 45
international franchise locations,  increasing the number of locations to 196 in
international  markets.  At  February 6, 1999,  the  Company  had  entered  into
development agreements to open an additional 428 stores abroad.

MANUFACTURING/WHOLESALE

     The  Company's  main  manufacturing  plant,  located in  Greenville,  South
Carolina,  is one of the largest  vitamin and mineral  supplement  manufacturing
facilities in the United States.  The plant,  which is owned by the Company,  is
solely  dedicated  to the  manufacture  of vitamin,  mineral,  herbal and sports
nutrition supplements.  The Company manufactures the majority of its products in
three forms:  tablet, soft gelatin and hard shell capsules and also manufactures
certain  powder  products.  The Company  utilizes  the plant  primarily  for the
production of proprietary  products that are sold at GNC stores.  Revenue at the
facility  is  generated  through  sales to various  third  parties  when  excess
capacity  becomes  available at the  facility.  Beginning in 1999,  the Company,
through its  wholesale  division,  will begin  supplying  Rite Aid private label
products  as  well  as  product  jointly  developed  by GNC  and  Rite  Aid  for
distribution in all Rite Aid locations.  The supply agreement with Rite Aid is a
five-year  agreement  with two  five-year  extension  options.  The Company will
continue to invest in the manufacturing  facility to ensure sufficient  capacity
to meet the  demands of the  Retail  and  Franchise  businesses  as well  assist
wholesale  distribution  commitments.   To  allow  for  increased  manufacturing
capacity  requirements,  in the fall of 1999 the Company will begin transferring
part of its manufacturing  process and finished goods inventory to a new 660,000
square foot  manufacturing  and  distribution  facility which is currently under
construction in Anderson, South Carolina.

     At  Manufacturing/Wholesale  the Company  places added  emphasis on quality
control, and conducts testing on all raw materials and finished products, weight
testing and purity  testing in the  Company's  state of the art micro  bacterial
lab. The  Company's  product  development  and quality  control  team  currently
consists of 65  individuals,  who work  closely  with the retail sales group and
scientific  affairs  group to respond to new  science  and  consumer  demands to
reformulate existing and develop new products. In 1998,  Manufacturing/Wholesale
developed a total of 243 new or reformulated products with over 45 scheduled for
1999.

     The principal raw materials used in the  manufacturing  process are natural
and synthetic  vitamins and gelatin.  The Company maintains multiple sources for
all raw materials.  Currently, eleven different vendors supply approximately 67%
of the manufacturing  facility's raw materials.  No other single vendor accounts
for more than 1% of its raw material  purchases.  The Company believes  multiple
sources exist to meet its raw material requirements.

     In 1995,  the Company  acquired  Health and Diet Food  Company  Limited,  a
United Kingdom  manufacturing  facility specializing in the packaging of vitamin
supplements  and  manufacture  of  certain  food  and  cosmetic  products,  sold
primarily  to  third-parties  in the U.K.  and Europe as well as to the  General
Nutrition Centres and Health and Diet Centres stores.

     During  1996,  the Company  acquired  the  manufacturing  operation  of DFC
Thompson Australia Pty Limited ("DFC"), an Australian  manufacturer.  As part of
the Company's  strategic decision to refocus on it's core business,  the Company
is considering the divesture of DFC.

Warehousing and Distribution

     The  Company  currently  distributes  its  products  through  three  leased
distribution  centers with its own drivers and leased  trucks as well as through
contract  and  common   carriers.   Substantially   all  the  products  sold  at
company-owned stores as well as the growing wholesale/distribution business, and
approximately  90% of products sold by  franchisees,  flow through the Company's
distribution  centers.  It is the Company's policy that all products be received
in the Company's distribution centers prior to sale to assure that such products
and their labels are reviewed for  compliance  with the Company's  Federal Trade
Commission consent decrees. Scheduled deliveries are made directly to GNC stores
on a one or two-week  basis and to its third party  customers as  required.  The
Company's three  distribution  centers are located in Pittsburgh,  Pennsylvania;
Atlanta,  Georgia;  and  Phoenix,  Arizona.  The Company  currently  anticipates
closing the Atlanta,  Georgia  facility and  relocating  it to the new Anderson,
South Carolina facility in the fall of 1999. Each of the distribution centers is
equipped with up-to-date automated conveyor systems and quality computer systems
to meet the  requirements of the continuing  store expansion  program as well as
the growing wholesale distribution business.

Government Regulations

     The  processing,  formulation,  packaging,  labeling and advertising of the
Company's  products are subject to regulation  by one or more federal  agencies,
including the Food and Drug  Administration  ("FDA"),  Federal Trade  Commission
("FTC"), the Consumer Product Safety Commission, the United States Department of
Agriculture and the Environmental  Protection Agency.  These activities are also
regulated  by  various  agencies  of the  states  and  localities  in which  the
Company's products are sold. The FDA, in particular,  regulates the formulation,
manufacture, and labeling of dietary supplements.
 
     Principally  through  the efforts of the dietary  supplement  industry,  on
October 25,  1994, the Dietary  Supplement  Health and Education Act of 1994 was
signed  into law.  The law amends the  Federal  Food,  Drug,  and  Cosmetic  Act
("DSHEA")  and, in the  judgment of the  Company,  is  favorable  to the dietary
supplement industry. First and foremost, the legislation creates a new statutory
class of "dietary  supplements".  This new class  includes  vitamins,  minerals,
herbs,  amino acids and other dietary substances for human use to supplement the
diet. A dietary supplement which contains a new dietary  ingredient,  one not on
the market as of October 15,  1994, will require evidence of a history of use or
other evidence of safety  establishing that it will reasonably be expected to be
safe, such evidence to be provided by the manufacturer or distributor to the FDA
before it may be marketed.  The  legislation  also  recognizes  the need for the
dissemination  of  information  about the link between  nutrition and health and
provides that  publications,  which are not false and  misleading  and present a
balanced view of available scientific  information on a dietary supplement,  may
be used in connection with the sale of dietary  supplements to consumers.  Among
other  changes,   the  new  law  prevents  the  further  regulation  of  dietary
ingredients as "food  additives" and allows the use of statements of nutritional
support on product labels and in other labeling.

     On September 23, 1997,  the FDA issued final new  regulations  to implement
the 1994  legislation.  Among other things,  these new  regulations  establish a
procedure for dietary supplement  companies to notify the FDA about the intended
marketing of a new dietary ingredient or about the use in labeling of statements
of  nutritional  support.  The  regulations  also  establish  a new  format  for
nutrition  labeling on dietary  supplements.  The new format became mandatory on
March 23, 1999, and the Company revised all of its dietary supplements labels to
be in compliance by that date.

     In 1984,  the FTC instituted an  investigation  of GNI, a subsidiary of the
Company,   alleging   deceptive  acts  and  practices  in  connection  with  the
advertising and marketing of certain of GNI's products.  GNI accepted a proposed
consent  order which was  finalized  in 1989,  under which GNI agreed to refrain
from,  among other things,  making certain claims with respect to certain of its
products  unless the  claims  are based on and  substantiated  by  reliable  and
competent scientific evidence. The Company had also entered into a consent order
in 1970 with the FTC, which generally  addressed "iron  deficiency  anemia" type
products.  As a result of routine  monitoring by the FTC as to  compliance  with
these orders,  disputes arose concerning GNI's compliance with these orders, and
with regard to advertising  for certain hair care  products.  While GNI believes
that,  at all times,  it operated in material  compliance  with the orders,  GNI
entered into a settlement in 1994 with the FTC to avoid  protracted  litigation.
As a part of this  settlement,  GNI  entered  into a  consent  decree  and paid,
without admitting liability, a civil penalty in the amount of $2.4 million.  GNI
agreed to adhere to the terms of the 1970 and 1989  consent  orders and to abide
by the provisions of the settlement document concerning hair care products.  The
Company does not believe that future  compliance  with the  outstanding  consent
decrees will materially affect its business operations.  GNI intends to petition
the FTC for clarification of what it believes is ambiguous and outmoded language
contained in the 1970 order and also to modify the 1989 order to minimize future
conflicts over the meaning of the orders.

     The FTC  continues to monitor the Company's  advertising  and, from time to
time,  requests  substantiation  with  respect  to such  advertising  to  assess
compliance  with the various  outstanding  consent  decrees and with the Federal
Trade  Commission Act. The Company's  policy is to use advertising that complies
with  the  consent  decrees  and  applicable   regulations.   To  better  ensure
compliance,  in 1993 the Company  discontinued  purchasing products at the store
and division levels and began to purchase centrally all third-party products for
company-owned  stores and  third-party  products  distributed  by the Company to
franchise  stores. It is also the Company's policy that all products be received
in the  Company's  distribution  centers to assure that such  products and their
labels are reviewed for compliance  with the consent  decrees prior to sale. The
Company also reviews the use of third-party point of purchase  materials such as
store signs and promotional brochures.  Nevertheless,  there can be no assurance
that  inadvertent  failures to comply with the  consent  decrees and  applicable
regulations will not occur.  Approximately 90% of the products sold by franchise
stores  flow  through  one  of  the  Company's  distribution  centers.  Although
franchise contracts contain strict requirements for store operations,  including
compliance  with federal,  state,  and local laws and  regulations,  the Company
cannot exercise the same degree of control over  franchisees as it does over its
company-owned  stores.  As a result of the  Company's  efforts  to  comply  with
applicable  statutes  and  regulations,  the  Company  has  from  time  to  time
reformulated,  eliminated  or  relabeled  certain of its  products  and  revised
certain provisions of its sales and marketing  program.  The Company believes it
is in material  compliance  with the various consent decrees and with applicable
federal and state rules and  regulations  concerning  its products and marketing
program.   Compliance   with  the  provisions  of  national,   state  and  local
environmental  laws  and  regulations  has not had a  material  effect  upon the
capital  expenditures,  earnings,  financial position,  liquidity or competitive
position of the Company.

     The  Company   cannot   determine  what  effect   additional   governmental
regulations or administrative orders, when and if promulgated, would have on its
business  in  the  future.   New  regulations   could,   however,   require  the
reformulation of certain  products to meet new standards,  require the recall or
discontinuance  of certain  products  not  capable of  reformulation,  or impose
additional record keeping,  expanded  documentation of the properties of certain
products, expanded or different labeling, and scientific substantiation.  Any or
all of such requirements could adversely affect the Company's operations and its
financial condition.

Employees

     At  February  6,  1999,  the  Company  employed  16,888  people,   of  whom
approximately   15,273  were   employed  in  Retail;   1,189  were  employed  in
Manufacturing/Wholesale;  46 were  employed in Franchising and 380 were employed
in corporate support functions. None of the Company's employees are covered by a
collective bargaining agreement.

ITEM 2.  PROPERTIES

     The Company leases its stores, distribution centers, office facilities, and
its  manufacturing  facilities in the United  Kingdom and  Australia.  The major
property  items are leasehold  improvements  and furniture and fixtures found in
these  locations.  Leasehold  improvements  are depreciated  over the shorter of
10 years or the term of the lease. Furniture and fixtures are amortized over the
estimated  useful  life  of the  assets.  Of the  approximately  2,530  domestic
company-owned  stores  operating at February 6, 1999,  an  estimated  64% of the
store leases are scheduled for renewal over the next five years.

     The Company  owns its vitamin  production  facility  in  Greenville,  South
Carolina,  as well as the Natures  fresh,  Lake Oswago store located in Portland
Oregon.  The Company has made annual  capital  investments  in the  facility for
expansion purposes to meet rising product demands. The Company will also own the
new 660,000 square foot  manufacturing and warehouse  facility that is currently
under construction in Anderson, South Carolina.

ITEM 3.  LEGAL PROCEEDINGS

     For  information  concerning  Legal  Proceedings,  see  Note 14 of Notes to
Consolidated Financial Statements under Item 8 of this Report, which information
is herein incorporated by reference.

     The  Company is  presently  engaged  in various  other  legal  actions  and
governmental proceedings,  and, although ultimate liability cannot be determined
at the present time,  the Company is currently of the opinion that the amount of
any such  liability  from these other actions and  proceedings  when taking into
consideration the Company's product liability coverage, will not have a material
adverse impact on its financial position, results of operations or liquidity.

     The  Company,  like other  retailers,  distributors  and  manufacturers  of
products  that are  ingested  faces an  inherent  risk of  exposure  to  product
liability claims in the event that, among other things,  the use of its products
results  in injury.  With  respect to product  liability  coverage  the  Company
currently has a $1 million  self-insured retention per occurrence and aggregate,
followed by a primary products liability policy of $1 million per occurrence and
aggregate,  followed by an  additional  $2 million  self-insured  retention  per
occurrence and aggregate,  and an additional  $120 million of umbrella liability
insurance coverage.  There can be no assurance that such insurance will continue
to be available at a reasonable cost, or if available, will be adequate to cover
liabilities.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    None

                                                    PART II


ITEM 5.MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Capital Stock Information

Stock Exchange Listing

     The  Company's  common stock is traded on the NASDAQ stock market under the
symbol GNCI. Options, when outstanding,  are traded on the Chicago Board Options
Exchange.

Common Stock Prices:

<TABLE>
<CAPTION>
                                                            1997                                      1998
                                            ------------------------------------       ----------------------------------
Quarter                                          High                 Low                   High                 Low
                                            ----------------    ----------------       ----------------    --------------


<S>                                                <C>  <C>            <C>  <C>               <C>  <C>           <C>  <C>
First                                              23 1/2              17 3/8                 41 1/4             33 3/8
Second                                             28 5/8              20 1/8                 37 1/4             27 7/8
Third                                              30 1/2              25 1/4                 32 1/2              9
Fourth                                             36 5/8              27 7/8                 21                  9 5/8
</TABLE>

Registrar and Transfer Agent:

THE BANK OF NEW YORK                    Send Certificates for Transfer and
   1-800-524-4458                       Address Changes To:
Address Shareholder Inquires to:
 
Shareholder Relations Department-11E    Receive and Deliver Department-11W
P.O. Box 11258                          P.O. Box 11002
Church Street Station                   Church Street Station
New York, NY 10286                      New York, NY  10286
 
E-Mail Address:                         The Bank of New York's Stock Transfer
Shareowner-svs@bankofny.com             Website: http://stock.bankofny.com
 
     On April 29, 1999,  the Company had  approximately  1,287  stockholders  of
record  and in excess  of  33,000  beneficial  shareholders.  General  Nutrition
Companies,  Inc. has never paid dividends on its Common Stock, currently intends
to reinvest its earnings for use in the business and does not expect to pay cash
dividends in the foreseeable  future.  The Company's credit  agreement  contains
certain restrictions on the Company's ability to pay dividends.

     During fiscal 1996, the Board of Directors authorized up to $160 million to
be available to purchase  shares of the  Company's  common  stock,  from time to
time, in the open market or in privately negotiated transactions.  During fiscal
1997,  the  Board of  Directors  authorized  an  additional  $150 million  to be
available  for such  purchases.  During  fiscal  1998,  the  Board of  Directors
authorized an additional  $300 million to be available  for such  purchases.  At
February 6, 1999 an aggregate of 26.7 million  shares had been  repurchased  for
$551.5 million. All repurchased shares have been retired.

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA

<TABLE>
<CAPTION>
                                           5-YEAR SUMMARY OF CONSOLIDATED FINANCIAL DATA
                                  (in thousands, except weighted average sales and per share data)

                                               1994               1995              1996              1997                1998
                                         ---------------     --------------    --------------    --------------     ---------------
                                            (52 weeks)         (52 weeks)        (52 weeks)        (52 weeks)          (53 weeks)

Operating Results:

<S>                                         <C>                <C>               <C>               <C>                <C>         
Net revenue                                 $  672,945         $  845,952        $  990,845        $ 1,193,485        $  1,417,746
Cost of sales, including costs of
  warehousing, distribution and
  occupancy                                    419,136            519,420           614,875            726,016             896,539
Selling, general and
  administrative                               155,384            187,833           223,557            272,215             337,594
Restructuring charge                                 -                  -            80,243                  -                   -
Compensation expense -
  non-cash                                         675              1,583            11,823              4,083                 276
                                         ---------------     --------------    --------------    --------------     ---------------
Earnings before interest and income
  taxes (operating earnings)
                                                97,750            137,116            60,347            191,171             183,337
Interest expense                                19,669             20,076            17,341             22,926              36,608
Income taxes                                    32,337             47,894            39,071             64,880              55,752
                                         ---------------     --------------    --------------    --------------     ---------------
Net earnings                              $     45,744         $   69,146      $      3,935        $   103,365       $      90,977
                                         ===============     ==============    ==============    ==============     ===============

Basic earnings per share                 $         0.60      $        0.84     $       0.05      $         1.27     $           1.21
                                         ===============     ==============    ==============    ==============     ===============

Diluted earnings per                     $         0.54      $        0.78     $       0.05      $         1.24     $          1.18
                                         ===============     ==============    ==============    ==============     ===============

     * Restructuring  charge  represents the  discontinuance of the Natures Food
Centres concept in 1996.

     * Included in the cost of sales and the selling, general and administrative
line items for 1998 are charges of $5.9 million and $5.0  million, respectively,
for  asset  disposition,  certain  severance  costs,  and  costs of  repackaging
products to meet the requirements of DSHEA.

Operating Data:

Number of stores (at end of period)
  Company-owned domestic GNC   stores
                                                 1,181              1,462             1,760              2,086               2,496
  Company-owned other stores                       184                122               113                124                 173
  Franchised stores                                750                959             1,174              1,225               1,422
                                         ---------------     --------------    --------------    --------------     ---------------
Total system-wide stores                         2,115              2,543             3,047              3,435               4,091

Company-owned domestic GNC store:
Weighted average annual sales per
  square foot                            $         267      $         283      $       262       $         267      $          269
Weighted average sale per customer
                                         $       17.75      $       19.60      $     21.48       $       23.74      $        24.09
Comparable store sales                             5.8%              10.3%             0.3%                7.9%               -0.2%

                                         February 4, 1995      February 3,       February 1,       January 31,      February 6, 1999
                                                                  1996              1997              1998
                                         ---------------     --------------    --------------    --------------     ---------------

Balance Sheet Data:

Working capital                           $     74,274         $   52,681         $ 133,688         $  141,361        $   211,142
Total assets                                   626,571            682,851           779,355            933,938          1,127,986
Total outstanding indebtedness                 316,501            218,472           378,869            358,348            797,500
Shareholders' equity                           202,837            326,657           240,223            350,712            104,916
</TABLE>

     ITEM 7.  MANAGEMENT'S  DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION

Forward-Looking Statements

     This annual  report on  Form 10-K  contains  statements  relating to future
results of the Company (including certain  projections and business trends) that
are "forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995. Actual results may differ materially from those projected as
a result of  certain  risks and  uncertainties,  including  but not  limited  to
changes in political and economic  conditions;  demand for and market acceptance
of new and existing products, as well as other risks and uncertainties  detailed
from time to time in the filings of the Company with the Securities and Exchange
Commission.

Results of Operations

     The Company's  revenue and earnings are generated  primarily from its three
business  segments,   Retail,  Franchising  and   Manufacturing/Wholesale.   The
following table summarizes the results by segment for years 1996, 1997 and 1998.
Fiscal  1998  comprised  53  weeks  compared  to 52 weeks in  fiscal  1997.  The
following information should be read in conjunction with Note 15 of Notes to the
Consolidated Financial Statements.

<TABLE>
<CAPTION>
                                              % of Total                           % of Total                          % of Total
                                 1996           Revenue             1997             Revenue            1998             Revenue
                            -------------    ------------     ---------------     ------------    ---------------     ------------
                                      (52 weeks)                         (52 weeks)                          (53 weeks)
                                                                        (in thousands)

Net Revenue:

<S>                            <C>                 <C>          <C>                    <C>          <C>                     <C>  
  Retail                       $ 726,758           73.3%        $   868,794            72.8%        $ 1,034,307             73.0%
  Franchising                    188,296           19.0             229,177            19.2             247,102             17.4
  Manufacturing/
     Wholesale                    75,791            7.7              95,514             8.0             136,337              9.6
                            -------------    ------------     ---------------     ------------    ---------------     ------------
Consolidated                     990,845          100.0           1,193,485           100.0           1,417,746            100.0

Operating Earnings:
  Retail                      $   98,282           13.5%        $   127,362            14.7%        $   103,001             10.9%
  Franchising                     40,714           21.6              49,546            21.6              59,496             24.1
  Manufacturing/
     Wholesale                    38,213           50.4              48,403            50.7              57,540             42.2
  Corporate                      (24,796)           -               (30,057)            -               (36,424)             -
                            -------------    ------------     ---------------     ------------    ---------------     ------------
                                 152,413           15.4             195,254            16.4             183,613             13.7

  Non-cash compensation
                              $   11,823            1.2%      $       4,083             0.4%      $          276             0.8%
  Restructuring Charge
                                  80,243            8.1%                  -             -                     -              -
                            -------------    ------------     ---------------     ------------    ---------------     ------------
Operating earnings                60,347            6.1             191,171            16.0             183,337             12.9
Interest expense, net             17,341            1.8              22,926             1.9              36,608              2.6
Income taxes                      39,071            3.9              64,880             5.4              55,752              3.9
                            -------------    ------------     ---------------     ------------    ---------------     ------------
Net earnings                $      3,935            0.4%        $   103,365             8.7%       $     90,977              6.4%
                            =============    ============     ===============     ============    ===============     ============
</TABLE>

     * Included in  operating  earnings for 1998 are charges of $5.9 million and
$5.0 million,  respectively for asset disposition,  certain severance costs, and
costs of repackaging products to meet the requirements of DSHEA.

                             1998 Versus 1997

     Consolidated.  Net revenue for 1998 increased to $1.4 billion,  an increase
of 18.8% over 1997.  This  increase  was driven by the success of the  Compan's
store  expansion  program and increased  demand for the Company's  products,  as
reflected by increased sales, across all business segments;  Retail, Franchising
and Manufacturing/Wholesale.  At February 6, 1999, the Company sold its products
though a network of 4,091 stores, 2,669 of which are company-owned and 1,422 are
franchised and are located  primarily in the United States,  Puerto Rico, and in
25   international   markets.   Additionally,    revenue   is   generated   from
Manufacturing/Wholesale  through  sales to third  parties.  In 1998  system-wide
retail sales (company-owned and franchise) from domestic GNC stores increased to
$1.4 billion or 12.6% over 1997.

     Consolidated  operating  earnings decreased by 4% to $183.6 million in 1998
compared to 1997.  Excluding  non-cash  compensation  expense and  non-recurring
items in both years,  operating  earnings decreased by.4% in 1998. This decrease
was due primarily to adjustments  made to better align the Company's  pricing on
certain sports  nutrition and commodity  vitamin  products to address  increased
competitive pressures. Additionally,  advertising expenditures increased in 1998
to $68.2  million or 4.8% of net revenue  compared with $53.5 million or 4.5% in
1997 due to the  Company's  sponsorship  of the Olympic  games  during the first
quarter of 1998.

     During 1998, the Company  recorded  various  charges for  severance,  asset
dispositions,  and the  labeling  requirements  of  DSHEA  as  well as  non-cash
compensation.  The charges  totaled $11.2  million,  of which,  $9.6 million was
recorded in the fourth quarter.

     Retail.  The Company sells its products at Retail  primarily in GNC Stores.
Revenue from non-GNC  stores was $88.9 million or 8.6% of Retail revenue in 1998
compared  to $83.2  million or 9.6% of Retail  revenue  in 1997.  GNC stores are
located primarily in the U.S. and Puerto Rico ("Domestic").  At February 6, 1999
there were 2,496 domestic  company-owned  GNC stores as well as 92 in Canada, 24
in the United Kingdom, and 3 stores in New Zealand.

     Revenue from  Domestic GNC stores was $924.5  million in 1998 compared with
$780.3 million in 1997.  The revenue  increase was generated  through  effective
advertising  and new product  offerings  and the net  addition of 401 new stores
that  included  136  franchise  stores  that  were  converted  to  company-owned
locations.  For the  stores  open  more that one year,  comparable  store  sales
decreased  0.2% in 1998 when compared to the same period in 1997. The comparable
store sales decrease was driven by decreased margins due to the Company revising
its pricing  strategy,  lowering  prices on branded sports  products and certain
commodity  vitamins and a slowing of the herb category sales as strong publicity
and a  media  campaign  in  1997  were  not  repeated  in  1998  and  additional
competition  from both the mass market and other  specialty  retail  stores.  In
addition, the Company adjusted its pricing strategy,  lowering prices on certain
branded sports products and commodity vitamins in order to respond to increasing
competitive  pressures.  The Company  believes  that this new pricing  strategy,
coupled with it's store opening  program and increased  advertising,  will allow
the  Company to  continue  to improve  its  percentage  share of the vitamin and
supplement market in 1999.

     Operating  earnings  from Retail were $103.0  million in 1998 compared with
$127.4  million  in 1997.  The  decrease  of $24.3  million or 19% was driven by
decreased  margins  due  primarily  to  adjustments  made to  better  align  the
Company's  pricing on certain sports nutrition and commodity vitamin products to
address increased competitive pressures and a slowing of the herb category sales
as strong publicity and a media campaign in 1997 were not repeated in 1998.

     During 1998, the Company  developed a web site,  GNC.com,  to sell products
via the Internet.  Although still in the early stages of operation,  the Company
expects sales to increase based on the growth of the Internet.

     Franchising.  Revenue from Franchising  increased to $247.1 million, a 7.8%
increase  over 1997.  Franchising  revenue is generated  primarily  from product
sales at  wholesale  prices and  royalties  on  franchise  retail  sales.  These
categories  represented  90.8% of total  franchise  revenue in 1998 and 92.7% in
1997. Additionally, revenue is generated from the initial franchise license fee,
sales of store  fixtures and  graphics  materials  and  interest  income for the
financing of the purchase of the store including the initial stock of inventory

     In 1998 retail sales from franchised locations increased to $414.5 million,
a 1.5%  increase  over 1997.  Franchise  stores which were open more than 1 year
reported comparable store sales increases of 6.9% in 1998 compared with 16.4% in
1997.  Those  franchises  that were in their first year of reporting  comparable
store sales had 1998 sales  increases of 21.8% when  compared  with the sales in
their first year of operations.

     Operating  earnings from  Franchising  improved to $59.5  million,  a 20.3%
increase  over 1997.  The  improvement  in earnings was  primarily the result of
increases in royalties  and product  sales caused by the 6.9% rise in comparable
store sales, as well as the net addition of 197 new franchise locations in 1998.

     The Company believes that the improvement in revenue and operating earnings
from  store  growth  will  continue  in 1999 as a result of  existing  franchise
license awards where the store locations are not yet opened. At February 6, 1999
there were,  through  awards or  development  agreements,  323  domestic and 428
international license fees paid for store locations that were not yet open.

     Manufacturing/Wholesale.  The Company  utilizes  its primary  manufacturing
facility, which is located in Greenville,  South Carolina, for the production of
propriety products,  which are sold at GNC stores. The Company sells products to
third parties when excess capacity becomes available at its Greenville  facility
as well as at its other  manufacturing  facilities  in the  United  Kingdom  and
Australia.  Revenue  from  sales to third  parties in 1998  increased  to $136.3
million,  a 42.7%  increase  over  1997.  Sales  generated  from the  Greenville
facility  were $121.7  million in 1998,  representing  a 51% increase  over 1997
sales. Revenue from the international facilities was $14.6 million in 1998.
 
     During 1998, operating earnings at  Manufacturing/Wholesale  increased $9.1
million or 18.4% over 1997. The increase was driven by the increased  demand for
commodity vitamins from third parties.

     The Company  believes that  third-party  sales will continue to increase in
1999 as capacity  grows with the  addition  of a new  manufacturing/distribution
facility,  currently  under  construction  in Anderson,  South Carolina which is
scheduled to be operational in the fall of 1999, and as a result of the alliance
formed  between the Company and Rite Aid during the fourth  quarter of 1998. The
Company aligned itself with Rite Aid to increase its market share in the vitamin
and  supplement   market  and  to  gain  entry  into  the  growing   mass-market
distribution  channel.  Rite Aid will open  1,500  full line GNC  stores  within
select Rite Aid  locations  over the next three  years.  The  Company  will also
manufacture  all of Rite Aid's  private  label  supplement  products  as well as
jointly develop a new line of dietary supplements called "PharmAssure(TM)" which
will be manufactured at the Company's Greenville  facility.  PharmAssure will be
available exclusively at GNC and Rite Aid stores.

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses  increased  by $65.4  million  or  24.0%  in 1998  when
compared to 1997.  The 1998  increase  exceeded  the  increase in net revenue of
18.8% by 5.2% This 5.2% increase results from several factors including expenses
of $4.9  million  related  to  severance  costs and the costs  related  to DSHEA
relabeling  and  increased  advertising  costs of $14.7  million  related to the
Company's sponsorship of the 1998 Winter Olympics.

     Non-Operating  Expenses.   Interest  expense,   including  amortization  of
deferred financing fees,  increased to $36.6 million in 1998 compared with $22.9
million in 1997.  The increase in interest  expense for 1998 when  compared with
1997 is primarily the result of additional borrowings on the Company's revolving
credit facility to repurchase  15,000,000  shares of the Company's  common stock
for $356.8  million  primarily  in the second and third  quarters of 1998 and to
fund the repurchase of 136 franchise  locations completed primarily in the first
and second quarters of 1998.

     Non-cash  Compensation  Expense. In 1998, the Company recorded $0.3 million
of non-cash  compensation  expense associated with its Management Stock Purchase
and Option plans compared with $4.1 million in 1997.

                             1997 Versus 1996

     Consolidated.  Revenue for 1997  increased to $1.2 billion,  an increase of
20.5% over 1996. The continuing success of the Company's store expansion program
as well as increased demand for the Company's  products resulted in 1997 revenue
and earnings  increases  over 1996 in each of the Company's  business  segments;
Retail,  Franchising  and  Manufacturing/Wholesale.  At January  31,  1998,  the
Company sold its products  though a network of 3,435 stores,  2,210 of which are
company-owned  and 1,225 are franchised and are located  primarily in the United
States, Puerto Rico, and in 19 international markets.  Additionally,  revenue is
generated from  Manufacturing/Wholesale  through sales to third parties. In 1997
system-wide retail sales  (company-owned and franchise) from domestic GNC stores
increased to $1.2 billion or 20.4% over 1996.

     Consolidated   operating   earnings,    before   restructuring,    non-cash
compensation costs and non-recurring items,  increased in 1997 to $195.3 million
or 28.1% when  compared  with 1996.  The  Company  continued  to leverage on its
vertical  integration  increasing the operating earnings return on sales in 1997
to 16.4%, up from 15.4% in 1996.

     Retail.  The Company sells its products at Retail  primarily in GNC Stores.
The Company  also  recognized  retail  revenue  from  non-GNC  stores  including
Nature's fresh,  Health and Diet Centres,  Amphora and Natures Food Centres.  In
1997 total revenue from these non-GNC  stores was $83.2 million or 9.6% of total
retail revenue. GNC stores are located primarily in the U.S. and Puerto Rico. At
January 31, 1998 there were 2,086 domestic  company-owned  GNC stores as well as
34 in Canada, 19 in the United Kingdom, and 1 store in New Zealand.

     Revenue from  domestic GNC stores was $780.3  million in 1997 compared with
$661.6 million in 1996. The revenue  increase was generated  through  comparable
store sales increases of 7.9% generated  through  effective  advertising and new
product  offerings,  and the net addition of 326 new stores  which  included 222
franchise stores that were converted to company-owned  locations. As a result of
the  increases to revenue from  comparable  store sale  increases  and franchise
store  acquisitions,  operating  earnings increased to $131.2 million in 1997, a
29% increase over 1996.

     Operating  earnings  from Retail were $127.4  million in 1997 compared with
$98.3 million,  prior to a restructuring  charge of $80.2 million,  in 1996. The
increase of $29.1  million or 29.6% was driven by the  continued  success of the
Company's store expansion  program as well as increased demand for the Company's
products as herb category sales increased due to a strong  publicity and a media
campaign in 1997.

     Franchising.  Revenue from Franchising increased to $229.2 million, a 21.7%
increase  over 1996.  Franchising  revenue is generated  primarily  from product
sales at  wholesale  prices and  royalties  on  franchise  retail  sales.  These
categories  represented 92.7% of total franchise revenue in 1997 versus 90.6% in
1996. Additionally, revenue is generated from the initial franchise license fee,
sales of store  fixtures and  graphics  materials  and  interest  income for the
financing of the purchase of the store.

     In 1997 retail sales from franchised locations increased to $408.2 million,
a 17.4%  increase over 1996.  Franchise  stores which were open more than 1 year
reported comparable store sales increases of 16.4% in 1997 compared with 8.5% in
1996.  Those  franchises  that were in their first year of reporting  comparable
store sales had 1997 sales  increases of 33.7% when  compared  with the sales in
their first year of operations.

     Operating  earnings from  Franchising  improved to $49.5  million,  a 21.7%
increase  over 1996.  The  improvement  in earnings was  primarily the result of
increases in royalties  and product sales caused by the 16.4% rise in comparable
store sales, as well as the net addition of 51 new franchise locations in 1997.

     Manufacturing/Wholesale.  The Company  utilizes  its primary  manufacturing
facility, located in Greenville, South Carolina, for the production of propriety
products  that are sold at GNC  stores.  The  Company  sells  products  to third
parties when excess  capacity  becomes  available at its Greenville  facility as
well as its other manufacturing  facilities in the United Kingdom and Australia.
Revenue from Manufacturing/Wholesale in 1997 increased to $95.5 million, a 26.0%
increase  over 1996.  In 1997,  the South  Carolina  facility had sales to third
parties of $80.6  million,  a 25.3%  increase over 1996 sales.  The increases in
revenue  continue to be driven by the demand for  commodity  vitamins from third
parties as well as the success of the Company's store expansion  program,  which
increased  the internal  demand.  Revenue from the  manufacturing  facilities in
Australia  and  the  United   Kingdom  was  $14.9  million  or  15.6%  of  total
manufacturing revenue.

     As  a  result  of  the   increases  in  revenue,   operating   earnings  in
Manufacturing/Wholesale increased to $48.4 million or 26.7% over 1996.

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses  increased  by $48.7  million  or  21.8%  in 1997  when
compared to 1996.  The 1998  increase in SG&A costs was exceeded by the increase
in net revenue of 20.4% by 1.4%. This favorable  relationship  was due, in part,
to the exceptional sales growth which occurred during 1997.
 
     Non-Operating  Expenses.   Interest  expense,   including  amortization  of
deferred financing fees,  increased to $22.9 million in 1997 compared with $17.3
million in 1996.  The increase in interest  expense for 1997 when  compared with
1996 is primarily the result of additional borrowings on the Company's revolving
credit facility to repurchase 1,665,000 shares of the Company's common stock for
$35.1  million in the second  quarter of 1997 and to fund the  repurchase of 222
franchise  locations  completed  primarily  in the third and fourth  quarters of
1997.

     Non-cash  Compensation  Expense. In 1997, the Company recorded $4.1 million
of non-cash  compensation  expense associated with its Management Stock Purchase
and Option plans compared with $11.8 million in 1996.

Review of Financial Condition

     Analysis of Liquidity and Capital  Resources.  In the years presented,  the
primary sources of cash have been the Company's operations, amounts available on
the revolving credit  facility,  and proceeds from the issuance of common stock.
The primary  uses of cash in each of the years  reported,  have been to fund the
Company's store expansion  program  through the  construction of new stores,  to
renovate existing stores, to acquire independent and franchised  locations,  and
in 1996,  1997 and 1998 to repurchase  the Company's  common stock.  The average
cost to build or renovate an average GNC store  ranges from $60,000 to $125,000,
depending on type and size of the store. Additionally,  the Company continues to
increase  capacities  at its  distribution  and  manufacturing  facilities.  The
Company   is    currently    in   the    process   of    constructing    a   new
manufacturing/distribution  facility in Anderson, South Carolina. As of February
6, 1999,  $8.1  million had been  expended  for  construction.  It is  currently
anticipated than approximately $61.0 million will be expended during fiscal 1999
to complete the facility. The Company will continue its store,  distribution and
manufacturing  expansion  programs  in 1999 and will fund the  requirements  for
these programs  primarily from operations and amounts available on its revolving
credit  facility.  During  fiscal 1998,  the Company  entered into an additional
credit facility in order to finance stock  repurchases and for general corporate
purposes.  This term facility  provides for additional  borrowings of up to $150
million, which, when combined with the revolving credit facility,  increased the
maximum borrowing availability from $700 million to $850 million. At February 6,
1999, the Company had $51.3 million  available on its revolving  credit facility
after excluding $2.7 million restricted for letters of credit and had no amounts
available on the term facility as all available amounts had been drawn down.

     The  Company's  cash  flows  from  operating,   investing,   and  financing
activities as reflected in the  Consolidated  Statements of Cash Flows (see Item
8) are summarized as follows:

<TABLE>
<CAPTION>
                                                                           Year Ended
                                                    ----------------------------------------------------------
                                                       February 1,          January 31,         February 6,
                                                          1997                 1998                1999
                                                    ------------------   ------------------   ----------------
                                                        (52 weeks)           (52 weeks)          (53 weeks)
                                                                         (in thousands)

Cash provided by (used in):
<S>                                                  <C>                   <C>                  <C>        
    Operating activities                             $      63,444         $    141,642         $   133,536
    Investing activities                                  (107,380)            (143,456)           (198,678)
    Financing activities                                    43,351                2,615              65,170
    Effect of exchange rate changes on cash                    585                 (801)                (28)
        changes on cash
                                                    ==================   ==================   ================
                                                     $                    $                    $
                                                                 -                    -                   -
                                                                                               
Net change in cash                                                                                        -
                                                    ==================   ==================   ================
</TABLE>

     Operating Activities.  Cash provided by operating activities decreased $8.1
million or 5.7% from 1997 to 1998.  The decrease is primarily the result of four
factors including, a $12.4 million or 12.0% decrease in net earnings and a $46.7
million  increase in inventory  offset by a $31.7  million  increase in accounts
payable and accrued  liabilities  and an increase in other working capital items
of $11.1  million.  These  changes were driven by  decreased  margins due to the
Company  revising  its  pricing  strategy,  lowering  prices on  branded  sports
products and certain commodity vitamins and a slowing of the herb category sales
as strong  publicity and a media  campaign in 1997 were not repeated in 1998. In
1997,  cash  provided by operating  activities  increased to $141.6  million,  a
123.3%  increase over 1996.  Receivables  and inventory grew by $9.5 million and
$37.2 million,  respectively,  in 1997 as the Company  continued it's successful
store expansion program through franchising and new company-owned locations.

     Investing  Activities.  The Company's  primary use of funds in 1996 was for
capital  expenditures and business  acquisitions.  In 1997 and 1998, the primary
use of funds was for capital  expenditures  and to fund the  repurchase,  by the
Company,  of 222 and 263 franchise  locations for approximately  $78.9 and $62.4
million, respectively.

     Capital  expenditures were $69.9 million,  $57.9 million and $110.7 million
for 1996, 1997, and 1998 respectively.  The majority of the capital spending was
to build new stores,  relocate or remodel  existing  locations and to expand the
Company's  manufacturing and distribution  capacity.  The 1998 increase of $52.8
million  or 91% over 1997  relates to the  completion  of a new  Nature's  fresh
prototype  store,  the  accelerated  opening of new  Company  stores,  increased
spending at Manufacturing/Wholesale  related to the expansion of the Greenville,
South  Carolina   facility  and  the  commencement  of  construction  of  a  new
manufacturing facility/distribution center in Anderson, South Carolina.

     In 1997,  the Company  advanced  $8.4 million to a related  party who, as a
partner with the Company,  has  refurbished  an office  building in  Pittsburgh,
Pennsylvania to serve as the Company's headquarters. The Company is permitted to
lend up to $30.0  million  under  the  terms of its  existing  revolving  credit
facility.  As of January 31, 1998 and February 6, 1999, the note  receivable was
$21,960 million and $28,526, respectively.

     Financing  Activities.  In  1996,  1997 and  1998  the  Company's  Board of
Directors  authorized  the use of up to $610 million for the  repurchase  of the
Company's  common stock.  At February 6, 1999,  the Company had utilized  $551.5
million to purchase  26,665,000  shares of common stock. All repurchased  shares
have been  retired.  In 1997,  the  Company  amended  and  restated  its  credit
agreement to increase the maximum borrowing availability on the revolving credit
facility from $400 million to $700 million.  The Company incurred a cost of $1.8
million in connection  with this  transaction.  During 1998, the Company entered
into an additional credit facility in order to finance stock repurchases and for
general corporate purposes. The new facility allows for additional borrowings of
up to $150  million.  The Company  incurred a cost of $0.5 million in connection
with this transaction. At February 6, 1999 the Company, after a letter of credit
restriction of $2.7 million, had $51.3 million available on its revolving credit
facility.  Additionally  in 1998,  the  Company  received  net  proceeds of $2.8
million by trading put options  giving the Company the  potential  obligation to
purchase 3.5 million shares of its own stock for $118.8 million.  At February 6,
1999, the Company no longer has any obligation related to the put options as all
related shares were purchased and subsequently retired by the Company.

     Recently Adopted Accounting Standards. The Company has adopted Statement of
Financial  Standards  ("SFAS")  No.  131,  "Disclosures  about  Segments  of  an
Enterprise and Related  Information"  which was issued in June of 1997. This new
accounting standard requires disclosure of segment information on the same basis
that is used  internally for evaluating  performance  and allocating  resources.
Accordingly,  the Company reports three worldwide segments: Retail, Franchising,
and Manufacturing/Wholesale. All of the Company's products that do not fall into
one  of  these  three   segments  are   represented   in  the  category   titled
Corporate/Other.

     Subsequent Event. As part of the Company's strategy to re-focus on its core
business, on April 22, 1999, the Company executed a definitive agreement to sell
its Nature's fresh  Northwest  gourmet grocery store chain to Wild Oats Markets,
Inc. The Company expects to complete this transaction  during the second quarter
of 1999,  and will reflect such  transaction  in the  Company's  second  quarter
results.

     Year 2000.  The Year 2000 problem  arises from the fact that many  existing
information  technology ("IT"),  hardware,  software systems and non-information
technology  ("non-IT") products  containing  embedded microchip  processors were
originally programmed to represent any date with six digits (e.g., 12/31/99), as
opposed to eight digits (e.g., 12/31/1999).  Accordingly, problems may arise for
many such products and systems when attempting to process information containing
dates that fall after  December 31, 1999.  As a result,  many such  products and
systems  could   experience   miscalculations,   malfunctions   or  disruptions.
Additionally,   such  products  and  systems  may  experience   miscalculations,
malfunctions  or  disruptions  caused by other dates,  such as September 9, 1999
(9/9/99),  which was a date  traditionally  used as a default  date by  computer
programmers.  This problem is commonly  referred to as the "Year 2000"  problem,
and the acronym"Y2K" is commonly substituted for the phrase "Year 2000."

     The Company's  State Of Readiness For Its Year 2000 Issues.  As a result of
the Company's  software upgrades and computer system purchases over the past few
years, a substantial  number of the Company's computer systems should not have a
Y2K  problem  (i.e.,  are   "Y2K-compliant")   or  have  been  warranted  to  be
Y2K-compliant by third-party  vendors. The Company has created a task force (the
"Y2K  Task  Force"),  that  includes  members  from  the  Company's  significant
operating areas. To date, the Y2K Task Force has implemented a program, the goal
of which is to  assess  the  potential  exposure  of each  such  area to the Y2K
problem,  which is the first phase of the Company's overall Y2K program, and, as
the second phase thereof,  has designed a coordinated plan to determine  whether
any such  potential  exposure  would result in a problem that would require some
remediation.  As each such area's Y2K problems are  identified,  the third phase
will be to formulate proposals to determine the best course of action to address
each such  problem and to address  each such  problem  through  remediation  and
testing. The final phase of the overall Y2K program will be both independent and
coordinated testing to ensure Y2K compliance in each operating area. The Company
believes  that the Y2K Task  Force has  identified  all  material  IT and non-IT
systems owned or operated by the Company that require a Y2K  compliance  review.
The Y2K Task Force has the  responsibility  for  addressing  any Y2K problems in
either IT or non-IT  systems.  All of the  Company's IT systems,  including  its
accounting and human resources, are, at a minimum, in testing phase. Testing for
Y2K  compliance  has  already  begun for each such system and the Y2K Task Force
estimates  that  testing of the  Company's  most  critical  IT  systems  will be
substantially completed by the Company's  first quarter of 1999 and that the Y2K
project will be completed no later than the end of the Company's second quarter,
which is prior to any anticipated material impact on its operating systems.

     The Y2K Task  Force  has  also  identified  those  third  parties,  such as
software and hardware suppliers,  significant vendors and external file exchange
providers,  whose Y2K  compliance  or lack  thereof  may pose  problems  for the
Company.  Pursuant to the Y2K Task  Force's  plan,  inquiries  have been sent to
those third parties.  The Y2K task force has been receiving initial responses to
its inquiries  from all such third  parties and has been taking the  appropriate
action based on the responses. External file exchange  providers  whose data are
essential to the Company's  most critical  systems and software  suppliers  will
undergo testing regardless of their responses to the Company's inquiries.

     The Costs To Address The Company's Year 2000 Issues.  The Company has used,
and will  continue  to use,  principally  internal  resources  to  reprogram  or
replace, test and implement its IT and non-IT systems for Y2K modifications. The
Company does not presently track the internal costs incurred on the Y2K project.
Such  costs are  principally  payroll  and  related  costs for its  internal  IT
personnel.  The total cost of the Y2K project,  excluding  these internal costs,
have been nominal and have been funded through operating cash flows. The cost of
purchases allocated for hardware and software, as well as all other expenditures
will be expensed as incurred or  capitalized  in  accordance  with the Company's
fixed asset policy. Management currently believes that the total cost associated
with  required  modifications  to  become  Year 2000  compliant  will not have a
material  adverse impact on its business,  results of  operations,  liquidity or
financial  condition.  None of the Company's other  significant IT projects have
been delayed or deferred as a result of the implementation of the plan.

     Risks  Related To The  Company's  Year 2000 Issues.  The Company  presently
believes  it has an  effective  Plan in  place to  anticipate  and  resolve  any
potential Y2K issues in a timely manner. In the event, however, that the Company
does not properly identify Y2K issues or the compliance assessment,  remediation
and testing is not  conducted  on a timely  basis with respect to the Y2K issues
that  are  identified,  there  can be no  assurance  that  Y2K  issues  will not
materially  and  adversely  affect  the  Company's   results  of  operations  or
relationships  with third  parties.  In  addition,  disruptions  in the  economy
generally  resulting from Y2K issues also could  materially and adversely affect
the Company.  The amount of potential  liability  and lost revenue that would be
reasonably  likely to result  from the  failure by the  Company  and certain key
third  parties to achieve Y2K  compliance on a timely basis cannot be reasonably
estimated  at this  time.  A  contingency  plan has not yet been  developed  for
dealing with the most reasonably  likely worst case scenario,  and such scenario
has not yet been  clearly  identified.  The  Company  expects  to  complete  its
analysis and contingency planning by the end of its third quarter.

     The  estimated  costs  of the  Company's  Plan and the  dates by which  the
Company  believes  it will have  completed  each of the phases of the Plan,  are
based upon  management's  best estimates,  which rely upon numerous  assumptions
regarding  future  events,  including  the  continued  availability  of  certain
resources,  third-party  remediation plans, and other factors.  These estimates,
however,  may  prove  not  to be  accurate,  and  actual  results  could  differ
materially  from  those  anticipated.  Factors  that  could  result in  material
differences include, without limitation,  the availability and cost of personnel
with the appropriate training and experience,  the ability to identify,  assess,
remediate  and test all relevant  computer  codes and embedded  technology,  and
similar  uncertainties.  In  addition,  Y2K-related  issues may lead to possible
third-party  claims,  the impact of which cannot yet be estimated.  No assurance
can be given that the aggregate cost of defending and resolving such claims,  if
any, would not have a material adverse effect on the Company.

     Quantitative and Qualitative  Information About Market Risk. The Company is
exposed to  financial,  market and  economic  risks from  transactions  that are
entered into during the normal course of business. The Company's policies do not
permit active trading of, or speculation in, derivative  financial  instruments.
The Company's primary  significant market risk exposure relates to interest rate
risk. The following is a summarization  of the efforts to mitigate this interest
rate exposure. Interest Rate Risk

     The Company manages its interest rate risk in order to balance its exposure
between  fixed and  variable  rates while  attempting  to minimize  its interest
costs. The Company's  indebtedness as of February 6, 1999 is comprised primarily
of $646 million in borrowings  outstanding  under the revolving  credit facility
and a $150 million bank term loan.  Interest on the revolving credit facility is
variable based on certain  published prime and/or  Eurodollar  borrowing  rates,
plus or minus  applicable  margin  adjustments.  Prime  advances  are subject to
margin  adjustments  ranging from 0.0% to 0.25% with  Eurodollar  advances being
subject  to margin  adjustments  ranging  from 0.5% to 1.5%.  Applicable  margin
adjustments  for both advances are based upon financial  performance  covenants.
Interest on the bank term loan is variable based on prime plus add-on margins of
0.5% to 4.0% and/or  Eurodollar plus add-on margins of 1.5% to 4.0%.  Applicable
margin  adjustments  for both  advances  are  based  upon term  limitations  and
financial  performance  covenants.  At February 6, 1999,  the Company's  blended
effective  interest rate on borrowings  outstanding  was 6.9%. A hypothetical 69
basis point or 10% change in the blended  effective  interest rate assuming debt
levels as of  February  6, 1999,  would  result in a $5.5  million  increase  or
decrease in interest costs.
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEPENDENT AUDITORS' REPORT

BOARD OF DIRECTORS AND SHAREHOLDERS
GENERAL NUTRITION COMPANIES, INC.

     We have audited the  accompanying  consolidated  balance  sheets of General
Nutrition  Companies,  Inc. and  subsidiaries  (the "Company") as of February 6,
1999 and January 31, 1998 and the related  consolidated  statements  of earnings
and  comprehensive  income,  shareholders'  equity  and cash flows for the years
ended  February 6, 1999,  January 31, 1998 and February 1, 1997. Our audits also
included  the  financial  statement  schedule  listed in the Index at Item 14.
These   financial   statements   and  financial   statement   schedule  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial  statements and financial statement schedule based on
our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion,  such consolidated  financial statements present fairly, in
all material respects,  the financial  position of General Nutrition  Companies,
Inc.  and  subsidiaries  as of  February  6, 1999 and  January  31, 1998 and the
results of their operations and their cash flows for the years ended February 6,
1999,  January 31,  1998,  and  February 1, 1997 in  conformity  with  generally
accepted accounting  principles.  Also, in our opinion, such financial statement
schedule,  when  considered  in  relation  to the basic  consolidated  financial
statements  taken as a whole,  presents  fairly  in all  material  respects  the
information set forth therein.





Deloitte & Touche LLP
March 3, 1999 (April 22, 1999 as to Note 19)
Pittsburgh, Pennsylvania

                                                Consolidated Balance Sheets
                                              (in thousands, except share data)
<TABLE>
<CAPTION>

                                                                                      January 31, 1998        February 6, 1999
                                                                                     --------------------    --------------------

ASSETS
Current Assets:
<S>                                                                                   <C>                     <C>             
   Receivables, net                                                                   $         75,274        $         98,926
   Inventories                                                                                 244,196                 294,325
   Deferred taxes                                                                               14,190                  17,617
   Prepaid income taxes                                                                              -                   4,071
   Other current assets                                                                         29,305                  14,625
                                                                                     --------------------    --------------------
Total current assets                                                                           362,965                 429,564

Note due from related parties                                                                   21,960                  28,526
Property, plant, and equipment, net                                                            207,975                 275,473
Other assets                                                                                    33,895                  52,549
Deferred financing fees, net of accumulated
   amortization of $2,646 and $3,889                                                             3,710                   3,032
Goodwill, net of accumulated amortization of
   $62,327 and $74,425                                                                         303,433                 338,842
                                                                                     ====================    ====================
                                                                                       $       933,938         $     1,127,986
                                                                                     ====================    ====================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
   Accounts payable                                                                    $       126,905         $       121,386
   Accrued salaries, wages, vacations and related taxes                                         23,542                  23,009
   Accrued income taxes                                                                          4,825                       -
   Other current liabilities                                                                    65,392                  73,404
   Long-term debt, current portion                                                                 940                     623
                                                                                     --------------------    --------------------
Total current liabilities                                                                      221,604                 218,422

Long-term debt                                                                                 357,408                 796,877
Deferred taxes                                                                                   4,214                   7,771
Commitments and contingencies

Shareholders' Equity:
Common stock, $.01 par value:                                                                      819                     677
   Authorized 200,000,000 shares, issued and
   outstanding, 81,930,801 shares at January 31, 1998
   and 67,753,329 shares at February 6, 1999
Additional paid-in capital                                                                     171,224                       -
Stock options outstanding                                                                        7,693                   7,040
Subscriptions receivable                                                                        (3,598)                 (3,804)
Accumulated other comprehensive loss                                                              (318)                   (346)
Accumulated earnings                                                                           174,892                 101,349
                                                                                     --------------------    --------------------
                                                                                               350,712                 104,916
                                                                                     --------------------    --------------------
                                                                                       $       933,938         $     1,127,986
                                                                                     ====================    ====================

</TABLE>


    Notes to Consolidated Financial Statements are an integral part of these
statements.

               GENERAL NUTRITION COMPANIES, INC. AND SUBSIDIARIES
          Consolidated Statements of Earnings and Comprehensive Income
                     (in thousands, except per share data)


<TABLE>
<CAPTION>
                                                                                      Year Ended
                                                               ----------------------------------------------------------
                                                                  February 1,        January 31,         February 6,
                                                                     1997                1998                1999
                                                               ------------------  -----------------  -------------------
                                                                  (52 Weeks)          (52 Weeks)         (53 Weeks)

<S>                                                               <C>                <C>                 <C>         
    Net revenue                                                   $   990,845        $  1,193,485        $  1,417,746
    Cost of sales, including costs of warehousing,                                                                       
       distribution and occupancy                                     614,875             726,016             896,539
                                                               ------------------  -----------------  -------------------
                                                                      375,970             467,469             521,207
    Selling, general and administrative                               223,557             272,215             337,594
    Compensation expense - non-cash                                    11,823               4,083                 276
    Restructuring charge                                               80,243                   -                   -
                                                               ------------------  -----------------  -------------------
    Operating earnings                                                 60,347             191,171             183,337
    Interest expense, net                                              17,341              22,926              36,608
                                                               ------------------  -----------------  -------------------
     Earnings before income taxes                                      43,006             168,245             146,729
    Income taxes                                                       39,071              64,880              55,752
                                                               ------------------  -----------------  -------------------
    Net earnings                                                        3,935             103,365              90,977

    Other comprehensive income (loss) -
       Foreign currency translation adjustment, net of
         income taxes                                                     585                (801)                (28)
                                                               ------------------  -----------------  -------------------

    Comprehensive income                                        $       4,520        $    102,564      $       90,949
                                                               ==================  =================  ===================

    Basic earnings per share                                   $         0.05      $         1.27     $           1.21
                                                               ==================  =================  ===================

    Basic weighted average common shares                               84,907              81,140              75,302
                                                               ==================  =================  ===================

    Diluted earnings per share                                 $         0.05      $         1.24     $           1.18
                                                               ==================  =================  ===================

    Diluted weighted average common shares                             86,294              83,227              76,797
                                                               ==================  =================  ===================
</TABLE>





















     Notes to  Consolidated  Financial  Statements are an integral part of these
statements.


            GENERAL NUTRITION COMPANIES, INC. AND SUBSIDIARIES
                    Consolidated Statements of Shareholders' Equity
                           (in thousands)

<TABLE>
<CAPTION>

                                                                                  Accumulated
                                        Additional                                  Other
                            Common      Paid-In        Stock      Subscriptions  Comprehensive  Accumulated    Treasury
                              Stock      Capital      Options     Receivable        Income        Earnings       Stock        Total
                                                    Outstanding
                            ----------  ----------  ------------  ------------  -------------  -------------  ----------  ----------

<S>                              <C>       <C>         <C>         <C>                                  <C>                   
Balance, February 3, 1996   $    877    $253,521    $             $              $              $   67,592     $          $ 326,657
                                                        4,769             -           (102)                           -
   Net earnings                   -            -            -             -              -          3,935             -       3,935
   Common stock issued           23       44,064            -             -              -              -             -      44,087
   Subscription                                                                                                               
     receivable from                                                                                                       
     stock sales                  -            -            -        (3,295)             -              -             -      (3,295)
   Stock options granted          -            -        7,492             -              -              -             -       7,492
   Stock options                  7        9,645       (1,344)            -                             -                     8,308
   exercised                                                                             -                            -  
   Sale of put options            -        2,850            -             -              -              -             -       2,850
   Treasury stock purchases       -            -            -             -              -              -      (159,619)   (159,619)
   Business combination           6        9,217            -             -              -              -             -       9,223
   Translation                    -            -            -             -                             -                       585
   adjustments                                                                         585                            -  
                            ----------  ----------  ------------  ------------   -------------  -------------  ----------  ---------
Balance, February 1, 1997       913      319,297       10,917        (3,295)           483         71,527      (159,619)    240,223
   Net earnings                   -            -            -             -              -        103,365             -     103,365
   Common stock issued            3        7,699            -             -              -              -             -       7,702
   Subscription                                                                                                                   
     receivable from                                                                                                       
     stock sales                  -            -            -          (303)             -              -             -        (303)
   Stock options                 20       33,362       (3,224)            -                             -                    30,158
   exercised                                                                             -                            -  
   Sale of put options            -        5,440            -             -              -              -             -       5,440
   Treasury           stock    (117)    (194,574)           -             -                             -                   (35,072)
   activity, net                                                                         -                      159,619  
   Translation                    -            -            -             -                             -                      (801)
   adjustments                                                                        (801)                           -  
                            ----------  ----------  ------------  ------------   -------------  -------------  ----------  ---------
Balance, January 31, 1998       819      171,224        7,693        (3,598)          (318)       174,892             -     350,712
   Net earnings                   -            -            -             -              -         90,977             -      90,977
   Common stock issued            1        8,653            -             -              -              -             -       8,654
   Subscription                                                                                                                   
     receivable from                                        -                                                              
     stock sales                  -            -                       (206)             -              -             -        (206)
   Stock options                  7        9,390         (653)            -                             -                     8,744
   exercised                                                                             -                            -  
   Sale of put options            -        2,834            -             -              -              -             -       2,834
   Treasury stock purchases    (150)    (192,101)           -             -              -       (164,520)            -    (356,771)
   Translation                    -            -            -             -                             -                       (28)
   adjustments                                                                         (28)                           -  
                                                                                 -------------  -------------              ---------
                            ==========  ==========  ============  ============                                 ==========
Balance, February 6, 1999   $    677    $           $     7,040   $              $              $ 101,349      $           $ 104,916
                                               -                     (3,804)          (346)                           -
                            ==========  ==========  ============  ============   =============  =============  ==========  =========

</TABLE>





















     Notes to  Consolidated  Financial  Statements are an integral part of these
statements.


           GENERAL NUTRITION COMPANIES, INC. AND SUBSIDIARIES
          Consolidated Statements of Cash Flows
                                (in thousands)

<TABLE>
<CAPTION>
                                                                                           Year Ended

                                                                   -----------------------------------------------------------
                                                                      February 1,         January 31,         February 6,
                                                                         1997                1998                 1999
                                                                   ------------------  ------------------  -------------------
                                                                       (52 weeks)          (52 weeks)          (53 weeks)

Cash flows from operating activities:
<S>                                                                 <C>                  <C>                   <C>        
Net earnings                                                        $       3,935        $    103,365          $    90,977
 Adjustments to reconcile net earnings to net cash provided by                                                                
   operating activities:                                                                                                      
     Restructuring charge                                                  80,243                   -                    -
     Depreciation and amortization                                         40,533              44,005               57,847
     Amortization of deferred financing fees                                  649               1,108                1,243
     Loss on disposal of fixed assets                                           -                   -                4,993
     (Increase) decrease in deferred taxes                                (10,388)              7,465                  130
     Compensation expense                                                  11,823               4,083                  276
     Other                                                                    392                 257                    2
     Change in operating assets and liabilities, net of                                                                       
       acquisitions:                                                                                                          
       Increase in receivables                                            (18,129)             (9,506)             (17,518)
       Increase in inventories                                            (54,590)            (37,208)             (46,737)
       Increase in other assets                                            (2,672)               (585)              (1,774)
       Increase in accrued taxes                                            6,353               9,188                1,305
       Increase in accounts payable and accrued liabilities                10,884              24,593               31,650
       (Decrease) increase in other working capital items                  (5,589)             (5,123)              11,142
                                                                   ------------------  ------------------  -------------------
         Total adjustments                                                 59,509              38,277               42,559
                                                                   ------------------  ------------------  -------------------
 Net cash provided by operating activities                                 63,444             141,642              133,536
                                                                   ------------------  ------------------  -------------------

Cash flows from investing activities:
   Capital expenditures                                                   (69,853)            (57,901)            (110,720)
   Proceeds from asset disposals                                                -                   -                   31
   (Increase) decrease in franchisee notes receivable                      (8,024)              1,964              (10,676)
   Payments for franchise store acquisitions                               (8,081)            (78,867)             (62,376)
   Payments made for acquisitions, net of cash acquired                   (14,287)               (256)                   -
   Loan, investment in, and advances to related party                      (7,135)             (8,396)             (14,937)
                                                                   ------------------
                                                                                       ------------------  -------------------
Net cash used in investing activities                                    (107,380)           (143,456)            (198,678)
                                                                   ------------------  ------------------  -------------------

Cash flows from financing activities:
   Net borrowings (repayments) on revolving credit facility               193,901             (19,500)             440,300
   Retirement of long-term debt                                           (36,268)                  -                    -
   Increase (decrease) in book balance bank overdraft                       3,866              32,362              (30,292)
   Decrease in capital lease obligations                                   (1,361)             (1,021)              (1,148)
   Redemption of redeemable preferred stock                                  (450)               (184)                (248)
   Net proceeds from issuance of common stock and common stock
     options                                                               41,006              22,342               11,060
   Net proceeds from sale of put options                                    2,850               5,440                2,834
   Net payments for treasury stock                                       (159,619)            (35,072)            (356,771)
   Increase in deferred financing fees                                       (574)             (1,752)                (565)
                                                                   ------------------  ------------------  -------------------
 Net cash provided by financing activities                                 43,351               2,615               65,170
                                                                   ------------------  ------------------  -------------------
Effect of exchange rate changes on cash                                       585                (801)                 (28)
                                                                   ------------------
                                                                                       ------------------  -------------------
Net change in cash                                                              -                   -                    -
Beginning balance, cash                                                         -                   -                    -
                                                                   ==================  ==================  ===================
Ending balance, cash                                                 $          -        $          -        $           -
                                                                   ==================  ==================  ===================

Supplemental disclosures of cash flow information:
   Cash paid during the period for:
     Interest                                                        $     17,121       $      22,940       $       36,102
     Income taxes                                                          41,556              51,807               57,755
</TABLE>
     Notes to Consolidated Financial Statements are an integral part of these
 statements.


            Notes to Consolidated Financial Statements - continued
                      GENERAL NUTRITION COMPANIES, INC.
 
                      Notes to Consolidated Financial Statements

NOTE  1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of  Reporting.  The  consolidated  financial  statements  include the
accounts of the Company and its wholly owned  subsidiaries  after elimination of
intercompany  balances and  transactions.  The Company's fiscal year ends on the
Saturday  closest  but not prior to  January 31  of each year.  The fiscal  year
consists of fifty-two or fifty-three weeks divided into four quarters; the first
three quarters contain twelve weeks, and the last quarter contains sixteen weeks
in a fifty-two week year and seventeen weeks in a fifty-three week year.

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

     Revenue  Recognition.  The  Company  operates  predominately  as a retailer
through  company-owned and franchised stores, a majority of which are located in
the 50 United States,  Puerto Rico,  and 25  international  markets.  The retail
stores  offer a variety of vitamin and  mineral  supplements,  sports  nutrition
products and herbs.  The retail  stores are also a leading  provider of personal
care, and other health-related  products.  The retail segment recognizes revenue
at the moment that a sale to a customer is recorded.

     The Company's  franchise segment generates revenues through franchise fees,
product sales to franchisees, royalties, and interest income on the financing of
the franchise  locations.  The  franchisees  purchase a majority of the products
they sell from the Company at wholesale  prices.  Franchisee fees are recognized
by the  Company at the time of a  franchise  store  opening.  Revenue on product
sales to  franchisees  is  recognized  by the  Company as  product  is  shipped.
Remaining sources of income are recognized as earned.

     The  manufacturing  segment  sells  product  primarily to the other Company
segments and to a lesser degree to third party customers.  Revenue is recognized
as  product  is  shipped.  All  intercompany   transactions  are  eliminated  in
consolidation.

     Reclassifications.   Certain   amounts  in  previously   issued   financial
statements have been reclassified to conform to the 1998 presentation.

     Cash.  The Company  utilizes a cash  management  system  under which a book
balance cash overdraft exists for the Company's primary  disbursement  accounts.
This overdraft  represents  uncleared  checks in excess of cash balances in bank
accounts.  The  Company's  funds are  borrowed on an as needed  basis to pay for
clearing  checks.  At January 31, 1998, and February 6, 1999, cash overdrafts of
$32.4 million and $2.1 million, respectively, were included in accounts payable.

     Inventories.  Inventories  are  stated  at the lower of cost or market on a
FIFO (first in, first out) basis.

     Depreciation and Amortization.  Property,  plant and equipment are recorded
at cost.  Depreciation  and  amortization  are provided using the  straight-line
method over the estimated useful life of the property.

     Amortization  of improvements to leased premises is also provided using the
straight-line  method over the estimated useful life of the improvements or over
the life of the related leases if such periods are shorter. The Company provides
tax depreciation in conformity with the provisions of applicable tax law.

     Amortization  of  goodwill  is  provided  on  a  straight-line  basis  over
40 years, except for goodwill associated with the purchase of existing franchise
stores,  acquisitions of independent stores, and certain business  combinations,
for which the amortization periods range from 15 to 25 years.

     Depreciation  and  amortization  of  property,   plant  and  equipment  was
$30.9 million,  $34.4 million and  $50.6 million for the years ended February 1,
1997, January 31, 1998, and February 6, 1999, respectively.

     Amortization of deferred financing fees is provided using the straight-line
method,  which approximates the effective interest rate method, over the term of
the related debt.

     The Company periodically  evaluates its long-lived assets to determine that
the carrying values have not been impaired.

     Advertising Expenditures.  The Company recognizes advertising expense as it
is incurred.  Advertising  expense was  $42.1 million,  $53.5 million  and $68.2
million,  respectively,  for the years ended February 1, 1997, January 31, 1998,
and February 6, 1999.

     Pre-Opening  Expenditures.  The Company recognizes the cost associated with
the opening of new stores as incurred.

     Income  Taxes.  The  Company  utilizes  the asset and  liability  method of
accounting for income taxes. Under the asset and liability method,  deferred tax
assets and liabilities are recognized for the estimated  future tax consequences
attributable to differences  between the financial statement carrying amounts of
existing  assets and liabilities  and their  respective tax bases.  Deferred tax
assets and  liabilities  are measured  using enacted tax rates in effect for the
year in which  those  temporary  differences  are  expected to be  recovered  or
settled.  Income tax  expense/(benefit)  related to items of other comprehensive
income were $0.3 million,  ($0.4) million,  and ($0.02) million for fiscal 1996,
1997, and 1998, respectively.

     Foreign Currency Translation.  For all non-U.S. operations,  the functional
currency is the local currency.  Assets and liabilities of those  operations are
translated into U.S. dollars using year-end exchange rates;  income and expenses
are  translated  using the  average  exchange  rates for the  reporting  period.
Translation  adjustments are recorded as a separate  component of  shareholders'
equity.

     Treasury  Stock.  In 1996,  1997 and 1998, the Company's Board of Directors
authorized  the use of up to $610 million to  repurchase  the  Company's  common
stock in the open market. In 1997 the Company retired 11.7 million shares it had
purchased  at an average  cost of $16.69 per share during 1996 and 1997 and held
in treasury. In 1998 the Company retired 15.0 million shares it had purchased at
an average cost of $23.78 per share. The Company's  credit  facilities limit the
amount of common stock that can be repurchased.

     Note  Due From  Related  Party.  The  Company  is a  limited  partner  in a
partnership that purchased and operates a building in Pittsburgh,  Pennsylvania,
which serves as the Company's  headquarters.  The related party note  associated
with this  relationship  is a demand note which includes the option to borrow up
to  $30 million,  with interest rates based on prime or Eurodollar  rates plus a
margin  percentage.  At  February  6,  1999,  the  average  rates  for prime and
Eurodollar borrowings were 7.75% and 5.94%, respectively.  In 1999, a portion of
the  amount  due  under  the note was  repaid to the  Company  during  the first
quarter.

     Investment In Related Party. During 1998, the Company made an investment of
$3.3  million in a vitamin  company.  The  Company  also made  advances  of $5.1
million to this company  during the year.  The Company has committed to fund the
operations of the company during 1999.

     Stock-Based Compensation. The Company accounts for stock-based compensation
using the  intrinsic  value method  prescribed in  Accounting  Principles  Board
Opinion ("APBO") No. 25, "Accounting for Stock Issued to Employees," and related
interpretations.  Accordingly,  compensation  cost is measured as the excess, if
any, of the quoted market price of the Company's stock at the date of grant over
the amount an employee must pay to acquire the stock.

     New  Accounting  Pronouncements.  In June 1997,  the  Financial  Accounting
Standards  Board ("FASB")  issued  Statement of Financial  Accounting  Standards
("SFAS") No. 130  "Reporting  Comprehensive  Income."  SFAS No. 130  establishes
standards for reporting  comprehensive income and its components,  some of which
have been  historically  excluded  from the  Statement  of Earnings and recorded
directly to the equity section of an entity's  balance sheet.  SFAS No. 130 also
requires  that the  cumulative  balance  of these  items of other  comprehensive
income are reported  separately  from retained  earnings and additional  paid-in
capital in the equity  section of a balance  sheet.  This statement is effective
for fiscal years beginning after December 15, 1997. The Company has adopted SFAS
No. 130 in 1998 and has restated all prior periods presented.

     In June 1997, the FASB issued SFAS No. 131  "Disclosures  about Segments of
an Enterprise and Related  Information." SFAS No. 131 establishes  standards for
the way public companies report selected information about operating segments in
both quarterly and annual financial  statements to their  shareholders.  It also
establishes  standards  for related  disclosures  about  products and  services,
geographic  areas,  and major  customers.  SFAS No. 131 is effective  for fiscal
years  beginning  after December 15, 1997. This statement was not required to be
applied to interim financial  statements in the initial year of its application.
Adoption of SFAS No. 131 did not have a significant effect on the disclosures in
the Company's consolidated financial statements.

     In June 1998,  the FASB  issued  SFAS No. 133  "Accounting  for  Derivative
Instruments and Hedging Activities," which establishes  accounting and reporting
standards for derivative  instruments  and for hedging  activities.  It requires
that an entity  recognize all derivatives as either assets or liabilities in the
balance sheet and measure those  instruments  at fair value,  with the potential
effect on operations  dependent upon certain conditions being met. The statement
is effective for all fiscal  quarters of fiscal years  beginning  after June 15,
1999.  Management is currently in the process of evaluating what impact, if any,
the adoption of the statement will have on its financial  position or results of
operations when adopted.

NOTE  2.  RECEIVABLES

    Receivables at period end consisted of the following:

<TABLE>
<CAPTION>
                                                           January 31, 1998        February 6, 1999
                                                          ------------------     -------------------
                                                                        (in thousands)

<S>                                                         <C>                    <C>            
Franchise                                                   $       31,380         $        35,691
Manufacturing/Wholesale trade                                       26,573                  40,849
Current portion of franchise notes                                   9,954                  10,955
Other                                                                9,183                  13,395
Allowance for uncollectible accounts                                (1,816)                 (1,964)
                                                          ------------------     -------------------

                                                            $       75,274         $        98,926
                                                          ==================     ===================
</TABLE>

NOTE  3.  INVENTORIES

    Inventories at period end consisted of the following:

<TABLE>
<CAPTION>
                                                           January 31, 1998        February 6, 1999
                                                          ------------------     -------------------
                                                                        (in thousands)

<S>                                                          <C>                    <C>           
Product ready for sale                                       $     201,155          $      245,403
Unpackaged bulk product and raw materials                           39,203                  45,485
Packaging supplies                                                   3,838                   3,437
                                                          ------------------     -------------------

                                                             $     244,196          $      294,325
                                                          ==================     ===================
</TABLE>

NOTE  4.  PROPERTY, PLANT AND EQUIPMENT

    Property, plant and equipment at period end consisted of the following:

<TABLE>
<CAPTION>
                                                           January 31, 1998        February 6, 1999
                                                          ------------------     -------------------
                                                                        (in thousands)

<S>                                                         <C>                    <C>            
Land, buildings and improvements                            $       19,686         $        26,950
Machinery and equipment                                             82,039                 112,780
Leasehold improvements                                              87,830                 105,991
Furniture and fixtures                                             114,500                 136,261
Capital leases                                                       4,554                   9,255
Construction in progress                                             6,013                  29,621
                                                          ------------------     -------------------
                                                                   314,622                 420,858
Less: accumulated depreciation                                    (106,647)               (145,385)
                                                          ------------------     -------------------
                                                             $     207,975          $      275,473
                                                          ==================     ===================
</TABLE>


NOTE  5.  OTHER ASSETS

    Other assets at period end consisted of the following:

<TABLE>
<CAPTION>
                                                           January 31, 1998        February 6, 1999
                                                          ------------------     -------------------
                                                                        (in thousands)

<S>                                                         <C>                    <C>            
Franchise notes, less current portion                       $       32,107         $        41,782
Investment in and advances to related party                              -                   8,371
Other                                                                1,788                   2,396
                                                          ------------------     -------------------

                                                            $       33,895         $        52,549
                                                          ==================     ===================
</TABLE>

     The  notes  from  the  Company's  franchisees  are  demand  notes,  payable
primarily over five years.  Interest  accrues  principally at the rate of 13.75%
per annum and is payable monthly.  The Company has agreed to provide  additional
funding to a related party of up to $15.0 million over the next year.

NOTE  6.  LONG-TERM DEBT AND LINES OF CREDIT

    Long-term debt at period end consisted of the following:

<TABLE>
<CAPTION>
                                                             January 31, 1998    February 6, 1999
                                                            -----------------    ----------------
                                                                        (in thousands)

<S>                                                            <C>                  <C>       
Bank revolving credit facility                                 $    355,700         $  646,000
Bank term loan                                                            -            150,000
Capital leases                                                        2,648              1,500
                                                            -----------------    ----------------
                                                                    358,348            797,500
Less: current maturities                                               (940)              (623)
                                                            -----------------    ----------------

                                                               $    357,408         $  796,877
                                                            =================    ================
</TABLE>

     The Company has a revolving credit facility that provides for borrowings of
up to $700 million and has a maturity date of July 1, 2002. At February 6, 1999,
the interest  rate on the  revolving  credit  facility was 6.06%.  The agreement
subjects  the  Company to certain  restrictions  and  covenants,  including  the
restriction  to pay  dividends.  Interest on the  facility is variable  based on
certain  published  prime  and/or  Eurodollar  borrowing  rates,  plus or  minus
applicable margin adjustments.  Prime advances are subject to margin adjustments
ranging from 0.0% to 0.25%,  with  Eurodollar  advances  being subject to margin
adjustments  ranging from 0.5% to 1.5%.  Applicable margin  adjustments for both
advances are based upon financial performance  covenants..  The revolving credit
facility is guaranteed by the Company and also by its domestic subsidiaries.  At
January 31, 1998, and February 6, 1999, the Company had $341.4 million and $51.3
million  available on its revolving credit facility after excluding $2.9 million
and $2.7 million restricted for letters of credit, respectively.

     Additionally,  during fiscal 1998,  the Company  entered into an additional
term  credit  facility  in order to finance  stock  repurchases  and for general
corporate purposes.  The term facility provides for additional  borrowings of up
to $150 million and bears  interest at variable rates based on prime plus add-on
margins  of 0.5% to  0.75%  based  on  financial  performance  covenants  and/or
Eurodollar  plus add-on  margins of 1.5% to 4.0% based on term  limitations  and
financial performance covenants. . At February 6, 1999, the interest rate on the
term credit  facility was 9.06%.  The agreement  subjects the Company to certain
restrictions and covenants, including the restriction to pay dividends. The term
credit  facility  has a maturity  date of July 1, 2002.  At February 6, 1999 the
Company had no amounts  available on the term facility as all available  amounts
had been drawn down.

     At February 6, 1999, the average rates for prime and Eurodollar  borrowings
were 7.75% and 5.06%, respectively.
 
    At February 6, 1999, the Company's  total  long-term debt maturities are as
follows:

<TABLE>
<CAPTION>
                                                                            (in thousands)
                                                                       -----------------------

<S>       <C>                                                          <C>                  
          1999                                                         $                 623
          2000                                                                          324
          2001                                                                          244
          2002                                                                      796,216
          2003                                                                           93
                                                                       -----------------------

                                                                          $         797,500
                                                                       =======================
</TABLE>

    The Company's net interest expense for all periods is as follows:

<TABLE>
<CAPTION>
                                                                                       Year Ended
                                                              -----------------------------------------------------------

                                                               February 1, 1997      January 31, 1998    February 6, 1999
                                                              ------------------    -----------------    ----------------
                                                                  (52 weeks)            (52 weeks)          (53 weeks)
                                                                                     (in thousands)

Composition of interest expense:
<S>                                                              <C>                   <C>                 <C>        
    Interest on debt                                             $     17,336          $     23,422        $    37,447
    Amortization of deferred financing fees                               649                 1,108              1,243
    Interest income from related party                                      -                (1,239)            (1,762)
    Interest income - other                                              (644)                 (365)              (320)
                                                              ------------------    -----------------    ----------------

                                                                 $     17,341          $     22,926         $   36,608
                                                              ==================    =================    ================
</TABLE>

NOTE  7.  RESTRUCTURING CHARGE

     During  the  year  ended   February  1,  1997,   the  Company   recorded  a
restructuring  charge of $80.2  million.  The  charge  recorded  by the  Company
related to the write-off of goodwill, property and equipment,  inventories,  and
other assets  associated  with  management's  decision to discontinue the Nature
Food  Centres  ("NFC")  retail  concept.  The  charge  for NFC of $66.7  million
included $52.7 million of goodwill.  The remaining $13.5 million of the recorded
charge related to unproductive  assets,  primarily inventory relating to Natural
Solutions(R) fitness and apparel products,  all of which have been discontinued,
as well as the excess costs  resulting  from  retrofitting  the Alive  prototype
store.

NOTE  8.  SUPPLEMENTAL CASH FLOW INFORMATION

     The  Company  issued   595,000   shares  with  a  value  of   approximately
$9.2 million  in 1996 as part of the  acquisition of Nature's  fresh  Northwest,
Inc.

     The Company extended net loans to executives of $3.3 million,  $0.3 million
and $0.2  million in 1996,  1997 and 1998,  respectively,  relating  to the 1996
Management Stock Purchase Plan.

     The Company recorded a tax benefit of $3.8 million,  $11.4 million and $6.7
million in 1996,  1997 and 1998,  respectively,  primarily  as a result of stock
option activity.
 
     The Company  exchanged  $4.4 million in inventory for  advertising  credits
during 1998.

NOTE  9.  RETIREMENT PLANS

     The Company  sponsors a 401(k) defined  contribution  savings plan covering
substantially  all  employees  with more than three months of service.  The plan
provides for employee contributions of 1% to 15% of individual compensation into
deferred  savings and provides for Company  contributions of 25-45% of the first
5% of participant's contributions. The Company may make additional contributions
based upon the  achievement  of  performance  goals  established by the Board of
Directors.  The Company made cash  contributions  of $1.1 million in 1996, $ 1.0
million in 1997 and $0.9 million in 1998.


NOTE  10.  FRANCHISE FEE REVENUE

     The Company charges  franchisees a flat fee, payable prior to the franchise
store opening,  as  consideration  for the franchise rights and initial services
performed by the Company.  Once the franchised store is open, the Company has no
further obligations under this fee to the franchisee.  Therefore,  all franchise
fee revenue is recognized in the period in which a franchise store is opened.

    Franchise revenue related to this initial fee is as follows:

<TABLE>
<CAPTION>
                                                                                       Year Ended
                                                              -----------------------------------------------------------

                                                               February 1, 1997      January 31, 1998    February 6, 1999
                                                              ------------------    -----------------    ----------------
                                                                  (52 weeks)            (52 weeks)          (53 weeks)
                                                                                 (dollars in thousands)

<S>                                                             <C>                   <C>                 <C>         
Initial franchise fee                                           $       6,680         $       6,512       $      7,887
                                                              ==================    =================    ================

Number of operating franchised stores:
    Beginning of period                                                   959                 1,174              1,225
    Sales to franchisees                                                  294                   282                368
    Stores acquired/closed                                                (79)                 (231)              (171)
                                                              ------------------    -----------------    ----------------

    End of period                                                       1,174                 1,225              1,422

                                                              ==================    =================    ================
</TABLE>

NOTE 11.  FINANCIAL INSTRUMENTS

     At  January  31,  1998  and  February 6,   1999,  the  Company's  financial
instruments  consisted of bank debt,  franchisee notes  receivable,  and related
party notes receivable.  Based on the interest rates currently available and the
risk associated with the receivables,  management  believes that the fair values
of its financial instruments approximates their carrying values.

NOTE 12.  LONG-TERM LEASE OBLIGATIONS

     The Company has operating leases covering its retail store  locations.  The
leases generally  provide for an initial term of between five and ten years, and
some include  renewal options for varying terms  thereafter.  The leases require
minimum  monthly  rental  payments  and a pro  rata  share of  common  operating
expenses,  and most require additional rentals based on a percentage of sales in
excess of specified levels ("Percent  Rent").  Real estate taxes,  insurance and
other  executory  costs may be  included  in the  rental  payment  or charged in
addition to rent. In either case,  they have been  included in common  operating
expense. Other leases cover transportation equipment, data processing equipment,
distribution facilities and corporate headquarters.

     The composition of the Company's  rental expense for all periods  presented
included the following components:

<TABLE>
<CAPTION>
                                                                                       Year Ended
                                                              -----------------------------------------------------------
                                                               February 1, 1997      January 31, 1998    February 6, 1999
                                                              ------------------    -----------------    ----------------
                                                                  (52 weeks)            (52 weeks)          (53 weeks)
                                                                                     (in thousands)

Retail Stores:
Rent on long-term operating leases, net of sublease income
<S>                                                              <C>                   <C>                 <C>        
                                                                 $     70,234          $     74,777        $    90,163
Common operating expense                                               19,191                20,960             24,952
Percent rent                                                            3,166                 5,270              7,041
                                                              ------------------    -----------------    ----------------
                                                                       92,591               101,007            122,156
Other                                                                   9,598                11,522             13,930
                                                              ------------------    -----------------    ----------------

                                                                 $    102,189           $   112,529         $  136,086
                                                              ==================    =================    ================
</TABLE>

     Minimum future obligations for noncancellable operating leases with initial
or  remaining  terms of at least one year in effect at  February  6, 1999 are as
follows:

<TABLE>
<CAPTION>
                              Company Retail        Franchise                           Sublease income
                                  Stores          Retail Stores          Other(a)                            Consolidated
                             ----------------    ---------------     ---------------    ---------------    ---------------
                                                                     (in thousands)
     
<S>                                <C>                             <C>                 <C>                  <C>              <C>  
1999                            $   69,131          $   22,070           $   6,902        $   (22,070)       $    76,033
2000                                63,984              20,564               6,222            (20,564)            70,206
2001                                58,326              17,717               4,915            (17,717)            63,241
2002                                49,770              14,335               4,070            (14,335)            53,840
2003                                38,983              10,422               3,666            (10,422)            42,649
Thereafter                          61,597              27,900              30,111            (27,900)            91,708
                             ----------------    ---------------     ---------------    ---------------    ---------------

                                 $ 341,791           $ 113,008           $  55,886         $ (113,008)        $  397,677
                             ================    ===============     ===============    ===============    ===============
</TABLE>

     (a) Includes  $42.7 million for a lease with the related party discussed in
Note 1.

NOTE 13.  INCOME TAXES (TAX BENEFITS)

     Significant components of the Company's deferred tax assets and liabilities
at period end consisted of the following:
 
<TABLE>
<CAPTION>
                                                           January 31, 1998        February 6, 1999
                                                          ------------------     -------------------
                                                                        (in thousands)

Deferred Tax:
    Current assets:
<S>                                                        <C>                     <C>            
       Operating reserves                                  $         5,921         $         9,695
       Inventory capitalization                                      3,281                   2,981
       Deferred revenue                                              3,866                   3,822
       Deferred compensation                                           903                   1,074
       Other                                                           219                      45
                                                          ------------------     -------------------
    Total current assets                                            14,190                  17,617
                                                          ------------------     -------------------

    Non-current liabilities
       Option compensation                                          (2,692)                 (2,466)
       Fixed assets                                                  8,249                  11,093
       Other                                                        (1,343)                   (856)
                                                          ------------------     -------------------
    Total non-current liabilities                                    4,214                   7,771
                                                          ------------------     -------------------

                                                           $         9,976        $          9,846
                                                          ==================     ===================
</TABLE>

 

   Income taxes (tax benefits) for all periods consisted of the following
components:
<TABLE>
<CAPTION>

                                                                                       Year Ended
                                                              -----------------------------------------------------------
                                                               February 1, 1997      January 31, 1998    February 6, 1999
                                                              ------------------    -----------------    ----------------
                                                                  (52 weeks)            (52 weeks)          (53 weeks)
                                                                                     (in thousands)

Current:
<S>                                                             <C>                    <C>                 <C>        
    Federal                                                     $      45,992          $     56,301        $    52,213
    State                                                               3,890                 4,553              4,127
    Foreign                                                              (218)                    -                  -
                                                              ------------------    -----------------    ----------------
                                                                       49,664                60,854             56,340
                                                              ------------------    -----------------    ----------------

Deferred:
    Federal                                                           (10,346)                3,398                (98)
    State                                                                (247)                  628                315
    Foreign                                                                 -                     -               (805)
                                                              ------------------    -----------------    ----------------
                                                                      (10,593)                4,026               (588)
                                                              ------------------    -----------------    ----------------

Total                                                            $     39,071          $     64,880        $    55,752
                                                              ==================    =================    ================
</TABLE>

     The  Company's  effective tax rate differed from the statutory tax rate for
the following reasons:

<TABLE>
<CAPTION>
                                                                                       Year Ended
                                                              -----------------------------------------------------------
                                                               February 1, 1997      January 31, 1998    February 6, 1999
                                                              ------------------    -----------------    ----------------

Percent of pretax earnings:
<S>                                                                     <C>                  <C>                 <C>  
    Statutory federal tax rate                                          35.0%                35.0%               35.0%

Increase:
    Goodwill amortization                                               49.0%                 1.5%                1.9%
    State income tax, net of federal tax benefit                         5.5%                 2.0%                2.0%
Other                                                                    1.3%                 0.1%               -0.9%
                                                              ------------------    -----------------    ----------------

Effective income tax rate                                               90.8%                38.6%               38.0%
                                                              ==================    =================    ================
</TABLE>

     The  increase  in the  Company's  effective  tax rate  for the  year  ended
February 1,  1997 was due to the effect of the restructuring charge as discussed
in Note 7. The effective rate for the year ended February 1, 1997, excluding the
restructuring charge, would have been 39.5%.

NOTE 14.   LEGAL PROCEEDINGS AND SETTLEMENTS
 
     The  Company  and/or  one of its  subsidiaries  (the "GNC  Companies")  are
currently  named as defendants in  approximately 7 lawsuits in state and federal
courts  alleging  damages  arising  from the  ingestion  of products  containing
manufactured  L-Tryptophan  that  were  processed  and  distributed  by the  GNC
Companies and other non-related  companies prior to 1990. These lawsuits are all
that remain of over 400 such actions  against the GNC  Companies and the Company
believes that like all that were resolved  previously,  the remaining cases will
be resolved at no cost to the Company.  The cases are being vigorously  defended
pursuant  to a joint  defense  agreement  (the  "Agreement")  among  Showa Denko
America ("SDA") and numerous parties in the nutritional  supplement industry who
manufactured,  processed,  sold,  distributed  or  bottled  L-Tryptophan.  SDA's
parent,  SHOWA Denko ("SDK"),  was the  manufacturer  of the  L-Tryptophan  that
plaintiffs  allege caused their  injuries.  Pursuant to the  Agreement,  SDA has
agreed to pay all legal fees  incurred  by the GNC  Companies  in the defense of
these claims and to indemnify the GNC Companies against liability.

     By separate agreement,  SDK has unconditionally and irrevocably  guaranteed
all obligations of SDA under the Agreement. In addition, the GNC Companies, with
the other  signatories  to the  Agreement,  are  beneficiaries  of a $20 million
letter of credit delivered to secure SDA's performance of its obligations.

     The  Agreement  does  not  indemnify  the GNC  Companies  against  injuries
proximately  caused by them or  against  punitive,  exemplary  or other  damages
attributable  to their  intentional  misconduct.  Several of the pending actions
seek such damages.  The GNC Companies  believe they have reasonable  defenses to
such  claims.  The  GNC  Companies  also  believe  that  they  are  entitled  to
indemnification  or contribution  from other parties to the pending actions but,
pursuant to the Agreement, are not pursuing those claims at this time.

     In the unlikely  event that the benefit of the  Agreement,  the guaranty by
SDK and letter of credit were to be unavailable,  the GNC Companies have product
liability  insurance which they believe  provides  coverage for the L-Tryptophan
product  claims.  The damages  sought by the pending  actions  could exceed such
coverage in the unlikely  event that damages were to be awarded  solely  against
the GNC Companies and no  indemnification  or  contribution by other parties was
awarded  or  available.   Although  the  outcome  of  litigation  is  uncertain,
management of the Company,  upon  consultation  with counsel,  believes that the
Company will not be required to make any material  payments in  connection  with
the  remaining  actions,  and no provisions  have been made in the  consolidated
financial statement for any such possible loss.

     On June 24, 1996, a putative  class action,  Lavalla v. Lee et al, C.A. No.
15080,  was commenced  against the Company and two directors and shareholders in
the Court of  Chancery  of the State of  Delaware,  Newcastle  County,  alleging
violations  of the federal  securities  laws arising out of the  Prospectus  and
Registration  Statement (the "Prospectus") for a public offering of common stock
of the Company which took place on February 7, 1996 (the "Public Offering"). The
action was  dismissed  without  prejudice on December  29, 1997  pursuant to the
parties' stipulation. The named plaintiff, Gaetan Lavalla, subsequently became a
named plaintiff in Klein et al v. General Nutrition Companies, Inc. et al, Civil
Action No.  96-1455,  another  putative class action filed on August 2, 1996, in
the United States District Court for the Western  District of  Pennsylvania.  In
Klein, plaintiffs asserted that the Company is liable for violations of Sections
11 and  12(a)  of the  Securities  Act  of  1933  and  Section  1-501(a)  of the
Pennsylvania  Securities  Act,  arising out of  allegedly  false and  misleading
statements  in the  Prospectus,  and for  violations  of  Section  10(b)  of the
Securities Exchange Act of 1934 and for negligent  misrepresentation arising out
of allegedly false and misleading  public  statements during the period from the
Public  Offering  through May 28,  1996.  Plaintiffs  also  alleged that certain
officers, directors and shareholders of the Company, as well as the underwriters
for the Public  Offering,  are liable for other  violations  of the  federal and
state securities laws and for negligent misrepresentation.

     Defendants  moved  to  dismiss  the  Complaint  on  December  2,  1996  and
plaintiffs  subsequently  filed an Amended Complaint dated March 21, 1997, which
among other  things,  added Gaetan  Lavalla as a named  plaintiff.  On March 30,
1998,  the Court  granted the motions of all  defendants  to dismiss the Amended
Complaint with  prejudice.  On April 20, 1998, the plaintiffs  filed a Notice of
Appeal  with the United  States  Court of  Appeals  for the Third  Circuit.  The
Company  disputes  the  allegations  contained in the  complaint  and intends to
defend the action  vigorously.  The appeal has been fully briefed and was argued
on December 2, 1998. The appeal has not yet been decided.

     The  Company is  presently  engaged  in various  other  legal  actions  and
governmental proceedings,  and, although ultimate liability cannot be determined
at the present time,  the Company is currently of the opinion that the amount of
any such  liability  from these other actions and  proceedings  when taking into
consideration the Company's product liability coverage, will not have a material
adverse impact on its financial position, results of operations or liquidity.
 
     The  Company,  like other  retailers,  distributors  and  manufacturers  of
products  that are  ingested,  faces an  inherent  risk of  exposure  to product
liability claims in the event that, among other things,  the use of its products
results  in injury.  With  respect to product  liability  coverage  the  Company
currently has a $1 million self-insured  retention per occurrence and aggregate,
followed by a primary products liability policy of $1 million per occurrence and
aggregate,  followed by an  additional  $2 million  self-insured  retention  per
occurrence and aggregate,  and an additional $120 million of umbrella  liability
insurance coverage.  There can be no assurance that such insurance will continue
to be available at a reasonable  cost, or if available will be adequate to cover
liabilities.

NOTE  15.  BUSINESS COMBINATIONS
 
     In 1996,  1997  and  1998 the  Company  acquired  68,  222 and 263  stores,
respectively,  through  purchases  from  independent  store  owners and  Company
franchisees.  These  acquisitions  are  accounted  for  utilizing  the  purchase
accounting method. As a result of these transactions, goodwill of $8.1 million,
$49.5  million  and  $47.6 million  in 1996,  1997 and 1998,  respectively,  was
recognized in the consolidated financial statements.


NOTE  16.  SEGMENT INFORMATION

     GNC is the only  nationwide  specialty  retailer  of  vitamin  and  mineral
supplements, sports nutrition products and herbs, and is also a leading provider
of personal care, and other health-related products. It's segments are organized
by product on a worldwide  basis.  The  Company's  management  reporting  system
evaluates performance based on a number of factors; however, the primary measure
of performance is the after-tax  operating profit of each segment.  Accordingly,
the  Company  reports  three  worldwide   segments:   Retail,   Franchising  and
Manufacturing/Wholesale. All of the Company's products that do not fall into one
of these three segments are reported in the category  entitled  Corporate/Other.
The Retail segment generates revenue through the sale of proprietary branded and
third-party  branded  products  through  company-owned  stores.  The Franchising
segment generates revenue through the charge for initial franchise fee, the sale
of product at wholesale  prices,  a royalty on retail sales, and interest income
on amounts financed by the Company for the initial purchase of the store assets.
The  Manufacturing/Wholesale   segment  is  comprised  of  the  Company's  three
manufacturing  facilities which are located in Greenville,  South Carolina,  the
United  Kingdom,  and  Australia,  with the Greenville  location  serving as the
primary facility.  The facilities are primarily  dedicated to the manufacture of
proprietary products,  principally vitamin, mineral, herbal and sports nutrition
supplements  which  are  sold at GNC  stores.  When  not  producing  proprietary
products,  the  facilities  manufacture  products  which  are  sold  to  various
third-party customers, allowing the facilities to generate revenue.

     The accounting  policies of the segments are the same as those described in
the summary of significant accounting policies.

     The Company accounts for intersegment  sales as if the transactions were to
third-parties, that is, at current market prices.

     The following table  represents key financial  information of the Company's
business   segments;   Retail,   Franchising,    Manufacturing/Wholesale,    and
Corporate/Other and should be read in conjunction with Part I, Item 1, Business.
<TABLE>
<CAPTION>

                                                               1996                    1997                    1998
                                                       --------------------     ------------------     -------------------
                                                            (52 weeks)              (52 weeks)              (53 weeks)
                                                                                  (in thousands)

Retail
<S>                                                       <C>                      <C>                     <C>         
Net revenue                                               $     726,758            $    868,794            $  1,034,307
Operating earnings                                               18,816                 127,362                 103,001
Depreciation/amortization                                        33,924                  37,649                  48,888
Identifiable assets                                             584,979                 656,207                 791,650
Capital expenditures                                             59,699                  44,017                  79,864

Manufacturing/Wholesale
Intersegment sales                                        $     163,924            $    203,041           $     224,778
Third-party sales                                                75,791                  95,514                 136,337
Operating earnings                                               37,716                  48,403                  57,540
Depreciation/amortization                                         3,631                   4,587                   5,613
Identifiable assets                                              89,154                 113,941                 136,131
Capital expenditures                                             13,058                  13,048                  28,916

Franchising
Net revenue                                               $     188,296            $    229,177           $     247,102
Operating earnings                                               40,714                  49,546                  59,496
Depreciation/amortization                                           201                     275                     308
Identifiable assets                                              86,674                 103,937                 114,077
Capital expenditures                                                561                     248                     164

Corporate/Other
Operating expense                                        $      (36,899)           $    (34,140)         $      (36,700)
Depreciation/amortization                                         2,777                   1,494                   3,040
Identifiable assets                                              18,548                  59,853                  86,128
Capital expenditures                                              1,942                   9,664                   8,883


Consolidated Totals
Net revenue                                               $     990,845             $ 1,193,485            $  1,417,746
Operating earnings                                               60,347                 191,171                 183,337
Interest expense, net                                            17,341                  22,926                  36,608
Earnings before income taxes                                     43,006                 168,245                 146,729
Income taxes                                                     39,071                  64,880                  55,752
Net earnings                                                      3,935                 103,365                  90,977
Depreciation/amortization                                        40,533                  44,005                  57,849
Identifiable assets                                             779,355                 933,938               1,127,986
Capital expenditures                                             75,260                  66,977                 117,827
</TABLE>

     (a)  Retail  operating  earnings  includes  expenses  for  amortization  of
goodwill  of $9.6  million in 1996,  $9.5  million in 1997 and $12.2  million in
1998.  Retail  identifiable   assets  includes  goodwill,   net  of  accumulated
amortization,  of  $258.9 million  in 1996,  $297.4  million  in 1997 and $332.9
million in 1998.

     (b) 1996 operating earnings include $80.2 million of restructuring charges,
of   which    $79.5    million   is    recorded    in   Retail,    $497,000   in
Manufacturing/Wholesale, and $280,000 in Corporate/Other.

     (c) Included in  Corporate/Other  operating expenses in 1996, 1997 and 1998
is $11.8  million,  $4.1  million and $0.3  million,  respectively,  of non-cash
compensation expense charges.

     (d) Included in Corporate/Other  operating expenses in 1996 is $1.6 million
of severance charges.

     (e) Retail operating  earnings includes expenses for asset dispositions and
DSHEA relabeling costs totaling $9.3 million in 1998.

     (f) For all years presented, segment amounts, when aggregated, agree to the
Company's consolidated totals with the exception of Capital Expenditures,  which
differ  in each year  presented  due to the  portion  of the  purchase  price of
franchise  store  acquisitions  which  is  allocated  to  property,  plant,  and
equipment.  Intersegment sales from  Manufacturing  /Wholesale are eliminated in
consolidation of Net Revenues

     The following table represents the geographic information for the Company's
business   segments;   Retail,   Franchising,    Manufacturing/Wholesale,    and
Corporate/Other.

<TABLE>
<CAPTION>

                                                               1996                    1997                    1998
                                                       --------------------     ------------------     -------------------
                                                            (52 weeks)              (52 weeks)              (53 weeks)
                                                                                  (in thousands)

Revenues, based on location of customer:

<S>                                                       <C>                    <C>                     <C>           
United States                                             $     959,943          $    1,147,058          $    1,351,259
Foreign Countries                                                30,902                  46,427                  66,487
                                                       --------------------     ------------------     -------------------

     Total                                                $     990,845          $    1,193,485          $    1,417,746

Long-Lived Assets:

United States                                              $    168,212           $     197,920           $     261,151
Foreign Countries                                                 7,140                  10,055                  14,322
                                                       --------------------     ------------------     -------------------
 
     Total                                                $     175,352           $     207,975           $     275,473
</TABLE>

NOTE  17.  STOCK-BASED COMPENSATION PLANS

     The Company sponsors multiple stock-based compensation plans including both
stock option and stock purchase plans. Had  compensation  cost for the Company's
plans been  determined  based on the fair value at the grant date instead of the
intrinsic value method described in Note 1 for awards in 1996, 1997 and 1998 the
Company's net earnings and earnings per share would have been reduced to the pro
forma amounts indicated below:

<TABLE>
<CAPTION>

                                                                                          Year Ended
                                                               ----------------------------------------------------------

                                                                February 1, 1997    January 31, 1998     February 6, 1999
                                                               -----------------    ----------------     ----------------

<S>                                                             <C>                   <C>                  <C>        
Net income                              As reported             $      3,935          $   103,365          $    90,977
                                        Pro forma                    (11,528)              92,043               89,103

Basic earnings per share                As reported            $        0.05        $         1.27       $        1.21
                                        Pro forma                       (0.14)                 1.13                1.19

Diluted earnings per share              As reported            $        0.05        $         1.24       $       1.18
                                        Pro forma                       (0.14)                 1.11              1.16
</TABLE>

     The fair value of each option has been estimated on the date of grant using
the  Black-Scholes  options  pricing model with the following  weighted  average
assumptions for the fiscal years ended  February 1,  1997,  January 31, 1998 and
February 6, 1999 : expected  volatility  of 53% in 1996,  52% in 1997 and 56% in
1998;  no dividend  yield in any of the years;  expected life in years from 1 to
6 years in 1996,  1 to 5 years in 1997 and 1 to 6 years in 1998;  and  risk-free
interest rates of 6% in 1996, 5.5% in 1997 and 4.3% in 1998.

     The Company recorded compensation expense of $7.5 million, $4.1 million and
$0.3 million related to its fixed and  performance-based  stock option plans for
years  ended  February 1,   1997,   January  31,  1998  and  February  6,  1999,
respectively.

     All  of  the  Company's   Stock  Option  Plans  are   administered  by  the
Compensation Committee of the Company's Board of Directors.

STOCK OPTION PLANS

Fixed Stock Option Plans

     The Company has eight fixed stock  option plans  covering  officers and key
employees,  and  non-employee  directors.  A summary of each plan at February 6,
1999 is as follows:
<TABLE>
<CAPTION>

                               Shares             Maximum       Range of Exercise        Shares
                             Authorized            Life               Prices           Outstanding        Vesting Provisions
                          ----------------    --------------    -----------------    --------------     ----------------------
                           (in thousands)                                            (in thousands)

Employee Plans:
<S>  <C>                               <C>                   <C>         <C>     <C>               <C>       <C>               
1989                              2,173                 10          $1.25 - $2.50             36        5 years, 20% per year
1991                              1,600                 10                   1.25            102        6 years, 16.66% per year
1992                                400                 10           6.53 - 17.50            241        5 years, 20% per year
1993                              1,600                 10          10.84 - 17.50            365        4 years, daily basis
1995                              2,000                 10          11.06 - 19.50          1,103        4 years, daily basis
1996                              2,500                 10          11.06 - 32.14          2,242        4 years, daily basis
1998                              1,250                 10          11.06 - 34.63            497        4 years, daily basis

Non-Employee Plans:
1994 - directors                    100                 10          11.47 - 22.75            100        4 years, 25% per year
</TABLE>

     A summary of the status of the  Company's  fixed stock option plans for the
years  ended  February 1,  1997,  January  31,  1998 and  February 6, 1999 is as
follows:

<TABLE>
<CAPTION>

                                                 1996                             1997                            1998
                                     ----------------------------    -----------------------------    ---------------------------
                                                      Weighted                         Weighted                       Weighted
                                                      Average                          Average                        Average
       Fixed Stock Options            Shares          Exercise         Shares          Exercise        Shares         Exercise
                                                     Price Per                        Price Per                      Price Per
                                                       Share                            Share                          Share
--------------------------------     --------     ---------------    ---------     ---------------    --------    ---------------
                                  (in thousands)                   (in thousands)                  (in thousands)

<S>                                    <C>        <C>                  <C>         <C>                  <C>       <C>            
Outstanding at beginning of year       4,774      $       9.30         5,745       $      11.71         4,812     $      16.39
Granted                                1,715             16.36         1,050              27.89           797            15.82
Exercised                               (743)             6.05        (1,921)              8.79          (596)           11.46
Forfeited                                 (1)             2.50           (62)             14.27          (327)           22.54
                                     --------
                                                                     =========                        ========
Outstanding at end of year             5,745      $       11.71        4,812       $      16.39         4,686     $      14.50
                                     ========     ===============    =========     ===============    ========    =============

Options exercisable at year end        3,840      $        9.99        2,718       $      12.54         2,899     $      13.37
                                     ========     ===============    =========     ===============    ========    =============

Weighted average fair value of
 options granted during the year:
  Exercise price = Grant date
    fair value                       $  8.17                       $   27.55                        $
                                                                                                          -
  Exercise price > Grant date
    fair value                       $  10.42                        $     -                          $  17.50
  Exercise price > Grant date
    fair value                       $    8.81                       $     -                          $  12.53
</TABLE>

     The following table  summarizes  information  regarding the Company's fixed
stock options outstanding at February 6, 1999:

<TABLE>
<CAPTION>
                                              Outstanding Options                                 Options Exercisable
                          ----------------------------------------------------------    --------------------------------------
                                                   Weighted
                                                    Average         Weighted Average                          Weighted Average
       Range of                Number              Remaining            Exercise              Number           Exercise Price
    Exercise Price           Outstanding       Contractual Life        Price Per           Exercisable           Per Share
                                                                         Share
---------------------     ----------------     ----------------    -----------------    -----------------    -----------------
                           (in thousands)         ( in years)                             (in thousands)

<S>  <C>     <C>                  <C>                   <C>        <C>                           <C>         <C>        
     $1.25 - $10.84               633                   4.32       $       8.62                  622         $      8.60
      11.06 - 11.47               233                   9.21              11.11                   41               11.30
              11.88               885                   6.06              11.88                  885               11.88
      12.50 - 15.00                74                   5.83              13.77                   62               13.62
              15.50               950                   7.54              15.50                  561               15.50
              16.88                45                   7.92              16.88                   23               16.88
              17.50             1,834                   8.51              17.50                  683               17.50
      18.60 - 26.78                28                   7.33              22.80                   18               22.82
              32.14                 1                   8.77              32.14                    1               32.14
              34.63                 3                   8.96              34.63                    3               34.63
                          ================                                              =================
     $1.25 - $34.63             4,686                   7.27        $     14.50                2,899          $    13.37
                          ================                                              =================
</TABLE>

Performance-Based Stock Option Plans

     The  Company  currently  has  two  performance-based  plans  covering  both
employees and non-employees.

     Under the 1996 Stock Option Plan,  the Company is authorized to grant stock
options to selected officers and key employees.  Options vest at the rate of 25%
per year over a four year period commencing on the date of grant,  provided that
the market  price per share of the  Company's  common stock  achieves  specified
levels  of  appreciation  during  such four year  period.  Under the plan,  such
appreciation  must equal or exceed 20% in each year  commencing with the date of
grant of each option.  No more than 25% of the shares available for issuance can
vest in any one year.  If, in a given  year,  the market  price per share of the
Company's  common stock fails to achieve the specified  level,  the shares which
fail to vest in that year may vest in a  subsequent  year  within such four year
period commencing on the date of grant, assuming that the market price per share
of common stock achieves in such  subsequent year the level which was not met in
a previous year. If an option whose vesting is dependent upon the achievement of
specified  levels of stock price  appreciation  has not been fully vested by the
close of the four year period commencing on the date of grant, such option shall
be exercisable  for a thirty day period  commencing  with the close of such four
year period and thereafter shall terminate to the extent not exercised.

     A summary  of the  Company's  performance-based  stock  option  plans is as
follows:

<TABLE>
<CAPTION>

                                       Shares Authorized       Maximum Option        Range of Exercise           Shares
                 Plan                                               Life                   Prices              Outstanding
    -----------------------------      -----------------     -----------------     ---------------------    ----------------
                                         (in thousands)          (in years)                                  (in thousands)

<S>              <C>                           <C>                    <C>               <C>      <C>                <C>  
                 1996                          2,500                  10                $11.06 - $32.14             2,192
                 1998                          1,250                  10                  11.06 - 17.50               494

</TABLE>

     A summary of the status of the  Company's  performance-based  stock  option
plans as of February 6, 1999 is presented below:

<TABLE>
<CAPTION>
                                                 1996                             1997                            1998
                                     ----------------------------    -----------------------------    ---------------------------
                                                      Weighted                         Weighted                       Weighted
                                                      Average                          Average                        Average
    Performance-based Options         Shares          Exercise         Shares          Exercise        Shares         Exercise
                                                     Price Per                        Price Per                      Price Per
                                                       Share                            Share                          Share
--------------------------------     --------     ---------------    ---------     ---------------    --------    ---------------
                                  (in thousands)                   (in thousands)                  (in thousands)

<S>                                               <C>                  <C>         <C>                  <C>       <C>            
Outstanding at beginning of year           -      $         -          1,616       $      16.28         2,332     $      20.75
Granted                                1,616             16.28           957              27.24           741            15.81
Exercised                                  -              -             (116)             16.17          (108)           17.33
Forfeited                                  -              -             (125)             16.81          (279)           23.08
                                     --------
                                                                     =========                        ========
Outstanding at end of year             1,616      $      16.28         2,332       $      20.75         2,686     $      16.39
                                     ========     ===============    =========     ===============    ========    ===============

Weighted average fair value of
 options granted during the year:
  Exercise price = Grant date
    fair value                       $     -                         $     -                          $    -
  Exercise price > Grant date
    fair value                       $   10.74                       $  32.14                         $  11.64
  Exercise price > Grant date
    fair value                       $    9.84                       $     -                          $  17.50
</TABLE>

     The  following  table  summarizes   information   regarding  the  Company's
performance-based stock options outstanding as February 6, 1999:

<TABLE>
<CAPTION>

                                              Outstanding Options                                 Options Exercisable
                          ----------------------------------------------------------    --------------------------------------
                                               Weighted Average
                                                   Remaining        Weighted Average                          Weighted Average
       Range of                Number          Contractual Life      Exercise Price           Number           Exercise Price
    Exercise Price           Outstanding                               Per Share           Exercisable           Per Share
---------------------     ----------------     ----------------    -----------------    -----------------    -----------------
                           (in thousands)         ( in years)                             (in thousands)

<S>      <C>                      <C>                  <C>           <C>                                            <C>    
         $    11.06               195                  9.65          $    11.06                 -                   $  0.00
              15.50               869                  7.54               15.50                 393                   15.50
              16.88                44                  7.92               16.88                  20                   16.88
              17.50             1,573                  8.55               17.50                 371                   17.50
              22.32                 2                  8.23               22.32                   2                   22.32
              26.78                 1                  8.38               26.78                   1                   26.78
              32.14                 2                  8.77               32.14                   2                   32.14
                          ================                                              =================
    $11.06 - $32.14             2,686                  8.29          $    16.39                 789                 $ 16.54
                          ================                                              =================
</TABLE>

     The  Company  has  awarded  1.0  million  options  pursuant  to a new  1998
Management  and Director  Stock Option Plan (the "1998  Plan"),  under which 2.5
million  options have been reserved.  The terms of the 1998 Plan are essentially
the same as the 1996 Stock Option Plan. There are a total of 2.5 million options
reserved for issuance.  The remaining 1.5 million options can only be granted if
the Company's  future share price exceeds  certain  minimum  targets.  These 1.0
million options were granted with an exercise price of $34.625 per share,  which
equaled  the  fair  market  value  on the  date  of  grant.  If at the  date  of
shareholder  approval  the market value of the  Company's  stock is greater than
$34.625,  the Company will be required to record a charge  against  earnings for
the amount of the difference.
 
STOCK PURCHASE PLANS

Employee Stock Purchase Plan

     The Company  sponsors an Employee Stock Purchase Plan (ESPP) under which it
is authorized to issue up to 2.0 million shares of common stock to all employees
with a minimum of three months of service. The ESPP allows eligible employees to
contribute  through  payroll  deductions up to 10% of their annual salary toward
stock purchases. Stock purchases are made monthly on the first day of each month
at 90% of the closing price from the previous day.

1996 Management and Director Stock Purchase Plan

     On October 25,  1996, the Company's  shareholders  approved the adoption of
the  Company's  1996  Long  Term  Incentive  Program  which  included  the  1996
Management and Director Stock Purchase Plan (the "Stock Purchase  Plan").  Under
the Stock  Purchase  Plan,  the Company has  established a minimum  stockholding
requirement  for members of senior  management.  In order to  participate in the
Stock  Purchase  Plan, all officers of the Company must own Company stock with a
market value equal to at least one times their annual  salary,  or 50% for other
non-officer participants.

     Participants are permitted to purchase shares of the Company's common stock
at a price equal to 80% of the average  market  price of the common stock during
certain specified periods.  The Company recognizes  compensation  expense in the
periods  in which  shares are  purchased  under the Stock  Purchase  Plan in the
amount by which the fair market value per share of the Company's common stock at
the time of such purchase  exceeds the exercise  price per share under the plan.
The maximum number of shares which  participants are permitted to purchase under
the Plan is 2.5 times their annual  compensation  or director fees.  Non-officer
participants  may  participate  to 1.25 times  their  annual  compensation.  The
Company may extend loans to participants  for up to 50% of the amount  necessary
to  purchase  the  shares  under the Plan and the  applicable  withholding  tax,
provided  that no  participant  shall  borrow more than an amount  equal to 1.25
times such participant's  annual base salary. Any such loans bear interest at 6%
per annum and are secured by the common stock purchased by the participant.  The
Company  will  forgive the loan in the event the market  price of the  Company's
common stock  appreciates  by at least 25% or more over the base market price of
the common stock in each of the four years  commencing from the date of grant of
such loan. The Company will record compensation  expense for the amount of loans
forgiven in each fiscal year in which stock  appreciation  hurdles are attained.
To the extent that such loans are not  forgiven,  they are required to be repaid
at the earlier of  termination  of  employment  or  expiration  of the four year
period.

     Under the Stock  Purchase  Plan,  a total of  1.0 million  shares have been
reserved for issuance.  As of February 6, 1999,  839,987  shares were  purchased
under  the Stock  Purchase  Plan for  approximately  $12.8  million,  80% of the
average  market price of the common  stock.  At January 31, 1998 and February 6,
1999,   outstanding  Company  loans  made  in  connection  with  the  plan  were
$3.76 million and $4.0 million,  respectively. The Company recorded $4.1 million
and $0.3 million in  compensation  expense for the years ended  January 31, 1998
and February 6, 1999,  respectively,  in  connection  with the discount from the
market price of the common stock and with the forgiveness of loans.

     During 1998 the Company  approved the resetting of the strike prices on all
options issued from the 1992, 1993, 1995, 1996 and 1998 option plans for current
active  employees.  The new strike  was set at $17.50  for all  shares  that had
strike prices in excess of $17.50.  Options under the 1996 and 1998 Stock Option
Plans that vested based on stock price  appreciation  hurdles had the  remaining
vesting schedule restarted with the revised stock price hurdles.


NOTE  18.  EARNINGS PER SHARE

    The earnings per share calculations for all periods are as follows:

<TABLE>
<CAPTION>
                                                                                            Year Ended
                                                                      ------------------------------------------------------
                                                                      February 1, 1997   January 31, 1998    February 6, 1999
                                                                      ---------------    ----------------    ---------------
                                                                         (52 weeks)         (52 weeks)          (53 weeks)
                                                                               (in thousands, except per share data)

<S>                                                                    <C>                  <C>              <C>      
   Net earnings available for common shares                            $     3,935          $ 103,365        $  90,977
                                                                      ===============    ================    ===============

   Basic weighted average common shares outstanding                         84,907             81,140              75,302

   Basic earnings per share                                           $       0.05       $       1.27        $      1.21
                                                                      ===============    ================    ===============

   Net earnings available for common shares                            $     3,935          $ 103,365           $  90,977

   Basic weighted average common shares outstanding                         84,907             81,140              75,302

   Shares issuable from assumed conversion of  dilutive stock
      options                                                                1,387              2,087               1,495
                                                                      ---------------
                                                                                         ================    ===============
   Diluted weighted average common shares                                   86,294             83,227              76,797
                                                                      ===============    ================    ===============

   Diluted earnings per share                                         $       0.05       $       1.24        $      1.18
                                                                      ===============    ================    ===============
</TABLE>

     There were no options or other equity  instruments  outstanding  during the
years ended February 1, 1997,  January 31, 1998 and February 6, 1999,  that were
excluded from the diluted earnings per share calculations.

NOTE 19.  SUBSEQUENT EVENT

     As part of the  Company's  strategy to re-focus  on its core  business,  on
April 22, 1999, the Company executed a definitive agreement to sell its Nature's
fresh  Northwest  gourmet  grocery  store chain to Wild Oats  Markets,  Inc. The
Company expects to complete this transaction  during the second quarter of 1999,
and will reflect such transaction in the Company's second quarter results.

NOTE  20.  QUARTERLY FINANCIAL DATA

    Unaudited quarterly financial information is as follows:
<TABLE>
<CAPTION>

                                                               Quarter Ended                                   Year Ended
                              -------------------------------------------------------------------------
                               April 25, 1998     July 18, 1998      October 10, 1998   February 6, 1999    February 6, 1999
         1998 (a)
                              ---------------    ---------------     ---------------    ---------------    ------------------
                                                           (in thousands, except per share data)

<S>                              <C>                <C>                 <C>                <C>                 <C>         
Net revenue                      $ 327,617          $  327,949          $  304,652         $ 457,528           $  1,417,746
Gross profit                       131,765             126,404             113,720           149,318                521,207
Net earnings                        30,238              27,983              17,955            14,801                 90,977

Basic earnings per share
                                $     0.37          $     0.34          $     0.25         $    0.22           $       1.21
Diluted earnings per share
                                $     0.36          $     0.34          $     0.25         $    0.22           $       1.18

</TABLE>

<TABLE>
<CAPTION>

                                                               Quarter Ended                                   Year Ended
                              -------------------------------------------------------------------------
                               April 26, 1997     July 19, 1997      October 11, 1997   January 31, 1998    January 31, 1998
         1997 (a)
                              ---------------    ---------------     ---------------    ---------------    ------------------
                                                           (in thousands, except per share data)

<S>                              <C>                <C>                 <C>                <C>                 <C>         
Net revenue                      $ 273,059          $  265,604          $  277,970         $ 376,852           $  1,193,485
Gross profit                       106,679             104,109             107,345           149,336                467,469
Net earnings                        23,859              23,054              23,932            32,520                103,365

Basic earnings per share                                                                 
                                 $    0.29          $     0.29          $     0.29         $    0.40           $       1.27
Diluted earnings per share
                                 $    0.29          $     0.28          $     0.29         $    0.39           $       1.24
</TABLE>

     (a) Each of the Company's  first 3 quarters  consists of 12 week  operating
results. The fourth quarter consists of 16 weeks in 1997 and 17 weeks in 1998.

     (b) Quarterly figures may not total year-end numbers due to rounding.

     ITEM 9. CHANGES IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON ACCOUNTING AND
FINANCIAL DISCLOSURE

    None


                                                         PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required by this Item concerning  directors is incorporated
by reference to the section  entitled  "Election of  Directors" in the Company's
definitive  Proxy  statement for its Annual Meeting of  Stockholders  to be held
June 24, 1999 and by reference to Part I of this Annual Report on Form 10-K.

     There is incorporated herein by reference to the Company's definitive Proxy
Statement for its Annual Meeting of  Stockholders  to be held June 24, 1999, the
information with the respect to compliance with  Section 16(a) of the Securities
and Exchange Act of 1934.

     Information  concerning  the  executive  officers of the  Company,  who are
elected by the board of directors and serve at their discretion, is as follows:

<TABLE>
<CAPTION>
    Name                                  Age        Title

<S>                                       <C>                                          
Jerry D. Horn                             61         Chairman of the Board and Director
William E. Watts                          46         Chief Executive Officer, and Director
Edwin J. Kozlowski                        50         Executive Vice President of Administration and  Chief Financial Officer
Gregory T. Horn                           33         Chief Operating Officer and Executive Vice President of Business Development
Michael K. Meyers                         39         Executive Vice President and General Manager of General Nutrition Corporation
John A. DiCecco                           46         Senior Vice President  - Logistics-/Manufacturing/Wholesale of
                                                     GNI
James M. Sander                           42         Vice President - Law, Chief Legal Officer and Secretary
David R. Heilman                          46         Vice President - Strategic Planning & Corp. Development
Curtis J. Larrimer                        43         Vice President - Controller
Eileen D. Scott                           46         Vice President - Human Resources
Joseph Fortunato                          46         Senior Vice President - Store Development
J. Kenneth Fox                            48         Vice President - Treasurer
Thomas R. Shepherd                        69         Director
W.  Harrison Wellford                     59         Director
Ronald L. Rossetti                        55         Director
David Lucas                               51         Director
Edward G. Beimfohr                        66         Director
</TABLE>

     Mr. Jerry  Horn has served as  Chairman  of the Board of GNCI and GNC since
October 1991 and as Chairman of the Board of GNI since  November 1985.  Mr. Horn
served as Chief Executive Officer of GNI from May 1985 to December 1990 and also
served as President of GNI from May 1985 to  September 1988.  Mr. Horn is also a
director of CT Farm & Country,  Inc., Pam Am Int. Flight Academy Inc., Universal
Hospital  Services Inc. and Chevys Inc. From April 1983,  Mr. Horn was President
and from  April 1994  to May 1995,  he was Chief  Executive  Officer of Thousand
Trails,  Inc.  From  September 1979  to  April 1983,  he was President and Chief
Executive Officer of Recreational Equipment, Inc.

     Mr. Watts  has served as a director  of GNCI  since  October 1991  and as a
director of GNI since January 1986.  Mr. Watts has served as President and Chief
Executive  Officer  of  GNCI  since  October 1991,  as  President  of GNI  since
September 1988  and as Chief Executive  Officer of GNI since  December 1990.  He
served as Senior Vice President of GNI from January 1988 to  September 1988  and
previously  he  served  as  Senior  Vice   President-Retailing  of  GNI  between
August 1985 and January 1988.  Mr. Watts was Vice President-Retail Operations of
GNC from  February 1984  to August 1985  and prior thereto served as Director of
Retail Operations. Mr. Watts is also a director of C T Farm + Country, Inc.

     Mr. Kozlowski   became  Executive  Vice  President  of   Administration  in
September  1998  and  served  as  Executive  Vice  President  of GNCI and GNI in
February 1996  and he served as Chief  Financial  Officer  and  Treasurer  since
October 1991.   He  became  Chief   Financial   Officer  of  both  Companies  in
February 1990  and has served as Senior Vice President of both  Companies  since
August 1991   and  served  as  Controller  of  GNI  from   February 1987   until
February 1993  and as Treasurer of GNI since  October 1989 and as Vice President
since  June 1989.   He  served  as  Assistant   Controller  from  April 1985  to
February 1987.  Prior to April 1985,  Mr. Kozlowski  was Director of Accounting,
Budgets and Taxes of GNI.

     Mr. Gregory  Horn  became  Chief  Operating   Officer  and  Executive  Vice
President of Business Development in September 1998 and had previously served as
Chief Marketing Officer since  January 1997 and as Senior Vice  President-Retail
Sales  and   Marketing  of  GNC  since   February   1996.   He  served  as  Vice
President-Retail  Sales  of GNC  from  February  1995 to  February 1996  and was
previously  Divisional  Vice President of GNC from April 1994 to  February 1995.
Mr. Horn  joined GNC in June 1991 and served in various  positions with GNC. Mr.
Horn is also a director of Jillian's  Entertainment,  Sweetwater  Flatbread Co.,
Inc., Beyond Massage, Inc. and Sewickley Development, Inc.

     Mr. Meyers became Executive Vice President and General Manager in September
1998.  Mr.  Meyers began his  employment  with GNI in 1981 as a store manager in
Florida and has held various positions of increasing  responsibility  within the
Company,   including  regional  manager,   divisional   merchandising  head  and
divisional vice president.

     Mr. DiCecco        became       Senior       Vice        President       of
Logistics/Manufacturing/Wholesale  of GNI in  October 1990.  He  served  as Vice
President  of  Distribution  and  Procurement  of  GNC  from   February 1988  to
September 1990,  and as  Director  of  Distribution  of GNI  from  July 1985  to
January 1988  and as  Manager  of  Distribution  from  July 1981  to  June 1985.
Mr. DiCecco joined GNI in October 1978 as an Industrial Engineer.

     Mr. Sander became Vice President-Law,  Chief Legal Officer and Secretary of
GNCI and its subsidiaries in February 1993. Mr. Sander began his employment with
GNI in October 1988 as Assistant General Counsel and became Assistant  Secretary
in June 1989. From December 1985 to October 1988,  Mr. Sander was Assistant Vice
President  and Counsel of Equimark  Corporation,  a bank holding  Company.  From
October 1983 until  December 1985,  Mr. Sander was an attorney with the law firm
Meyer Unkovic & Scott.

     Mr. Heilman  joined  the  Company  in  December 1994  and  became  the Vice
President of  Strategic  Planning and  Corporate  Development  of the Company in
February 1995.  Prior to joining the Company,  Mr. Heilman was a consultant with
the Meridian Group, a private investment  banking concern.  From January 1990 to
December 1993, Mr. Heilman served as the President of First Westinghouse Capital
Corporation,  a subsidiary of Westinghouse Financial Services.  Prior to 1990 he
served as a Vice President for Westinghouse in a variety of capacities.
 
     Mr. Larrimer   became   Vice   President-Controller   of  the   Company  in
February 1995. Mr. Larrimer began his employment with GNI in the Budgets and Tax
Department in 1980 and has held various  positions of increasing  responsibility
within the  Company  including  Controller  of the  Manufacturing/Wholesale  and
Retail divisions and Assistant Corporate Controller.

     Mrs. Scott became Vice President of Human Resources in May 1996. Mrs. Scott
began her employment in August 1988 and has held various positions of increasing
responsibility within the Company,  including Assistant Director and Director of
Human Resources.

     Mr. Fortunato became Senior Vice  President-Store  Development in September
1998 and previously served as Vice President-Financial  Operations from November
1997 to August 1998. Mr. Fortunato began his employment with GNI in October 1990
and has held various positions of increasing  responsibility within the Company,
including Director of Financial Operations and Manager of the Credit Department.
Prior  to  1990,  Mr.  Fortunato  served  as  the  Controller  for  Motor  Coils
Manufacturing Company.

     Mr. Fox became Vice  President-Treasurer  of the Company in June 1997.  Mr.
Fox began his  employment  with GNI as Manager of Corporate  Accounting  in July
1985,  and has served in various  Accounting  and  Finance  positions  including
Manager   Accounting/Budgets,   Assistant  Corporate  Controller  and  Assistant
Treasurer.  Prior to 1985 Mr. Fox was  employed  by  Wheeling  Pittsburgh  Steel
Corporation, holding various accounting and budgeting positions.

     Mr. Shepherd has served as a director of the Company since October 1991 and
as a director of GNI since October  1989.  He is chairman of The Shepherd  Group
and has been engaged as a consultant to Thomas H. Lee  Company since 1986 and is
currently a Managing Director.  He is also a Director of Duro-Test  Corporation,
Health o meter Products,  Inc., Anchor Advanced Products, Inc., Sneaker Stadium,
Inc.,  Computer Assisted  Marketing,  Inc., and PNC New England. He is Executive
Vice President of Thomas H. Lee Advisors I and T.H. Lee Mezzanine II. Previously
Mr. Shepherd  was  Chairman  of Amerace  Corporation  from 1986 to 1988.  He was
Executive Vice President of GTE (Sylvania)  Lighting Products Group from 1983 to
1986,  President of North American Phillips Commercial  Electronics  Corporation
from  1981  to 1983  and  Senior  Vice  President  and  General  Manager  of GTE
(Sylvania) Entertainment Products Group from 1979 to 1981.

     Mr. Wellford  has  served  as a  director  of the  Company  and  GNI  since
January 1994.  Since  November 1991,  Mr. Wellford  has  been a  partner  in the
Washington, D.C.  office  of the law firm of  Latham &  Watkins  where he is the
firm's International  Chairman. He is a Director of Sithe Energies,  (one of the
world's leading  independent power companies),  and is a Founder of the National
Independent Energy Producers. He is director and treasurer of the Friends of Art
in  Embassies.  Mr. Wellford  was a partner  at the law firm of  Olwine,  Chase,
O'Donnell & Weyher, and a director of APBI Interactive Systems from 1989 through
1991;  and  prior  to that  time  period,  he was a  partner  at the law firm of
Wellford, Wegman and Hoff from 1981 through 1988. In addition,  Mr. Wellford was
Executive  Director of the  President's  Reorganization  Project  and  Executive
Associate  Director  of the Office of  Management  and  Budget in the  Executive
Director  of the from 1977 to 1981.  Mr. Wellford  also  served as a White House
transition  advisor to  Presidents-elect  Carter  (1992) and Clinton  (1992) and
Executive  Branch  transition  director  in the  Carter  -  Reagan  Presidential
transition (1980-1981).

     Mr. Rossetti  has  served as a  director  of the  Company  and of GNI since
September 1994.  He is currently President of Riverside Capital Partners,  Inc.,
Director of Tier Corporation,  Inc., Director of City Sports, Inc., and Director
of the Hamilton Companies,  Inc. From 1976 through September 1994,  Mr. Rossetti
was President,  Chief Executive  Officer and a director of Natures Food Centres,
Inc., which was acquired by the Company in 1994.

     Mr. Lucas  has served as a director of the Company and GNI since July 1996.
Mr. Lucas received a B.S. in Industrial Management at Purdue University in 1969.
He also received an MBA in Marketing  from Harvard  Business  School in 1971. In
1983 to 1984 he was employed as President  for Margos in Dallas,  TX.  Mr. Lucas
has been employed by Bonita Bay Properties, Inc., since 1984 and currently holds
a position as Chairman.

     Mr.  Beimfohr has served as a director of the Company and GNI since January
1999. He is a Senior Partner with Lane & Mittendorf Attorneys, New York, NY. Mr.
Beimfohr received an A.B. from Washington University in 1953.

ITEM  11.  EXECUTIVE COMPENSATION

     The information  required by this Item is  incorporated by reference to the
Section entitled  "Executive  Compensation"  in the Company's  definitive  Proxy
Statement for its Annual Meeting of Stockholders to be held June 24, 1999.

ITEM  12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information  required by this Item is  incorporated by reference to the
Sections entitled  "Ownership  of Stock by  Directors,  Nominees for  Directors,
Executive Officers and Certain  Beneficial  Owners" in the Company's  definitive
Proxy Statement for its Annual Meeting of Stockholders to be held June 24, 1999.

ITEM  13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The  information  required by this item is incorporated by reference to the
Section entitled   "Certain  Relationships  and  Related  Transactions"  in  the
Company's  definitive  Proxy Statement for its Annual Meeting of Stockholders to
be held June 24, 1999.

                                                                  PART IV

ITEM  14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  Documents filed as part of this report:

    Independent Auditors' Report
    Consolidated Balance Sheets for the years ended January 31, 1998 and 
      February 6, 1999
    Consolidated  Statements of Earnings and Comprehensive  Income for years 
        ended February 1,  1997,  January 31, 1998 and February 6, 1999
    Consolidated Statements of Shareholders' Equity for years ended February 1,
        1997, January 31, 1998 and February 6, 1999
    Consolidated Statements of Cash Flows for years ended February 1, 1997, 
        January 31, 1998 and February 6, 1999
    Notes to Consolidated Financial Statements
    Supplementary Financial Data:
    Selected Quarterly Financial Data (unaudited) for the fiscal years ended 
        January 31, 1998 and February 6, 1999
    Schedule II - Valuation and Qualifying Accounts 

     All Other  Schedules  are omitted  because they are not  applicable  or the
required information is included herein.

     (b) There have been no reports filed on Form 8-K during the last quarter of
the period covered by this report.

(c) Listing of Exhibits

 Exhibit
Number

3.1      Articles of Incorporation of General Nutrition,  Incorporated,  as
         amended.  (Incorporated  herein by reference to Exhibit 3.1 to the 
         Annual Report on Form 10-K of General Nutrition, Incorporated for the 
         fiscal year ended February 1, 1992, File No.  1-8055.)

3.2      By-laws of General  Nutrition,  Incorporated,  as amended. 
         (Incorporated  herein by reference to Exhibit 3.2 to the Annual Report
         on Form 10-K of General Nutrition, Incorporated for the fiscal year 
         ended February 3, 1990, File No.  1-8055.)

3.3      Articles of Incorporation  of General  Nutrition  Corporation,  as
         amended.  (Incorporated  herein by reference to Exhibit 3.5 to the 
         General  Nutrition,  Incorporated,  General  Nutrition  Companies, 
         Inc.  (f/k/a Lee-GN  Holding Corp.) and subsidiaries  of General
         Nutrition, Incorporated Registration Statement on Form S-1, 
         Registration No.  33-31892.)

3.4      By-laws of General Nutrition  Corporation,  as amended.  (Incorporated
         herein by reference to Exhibit 3.6 to the General Nutrition, 
         Incorporated,  General Nutrition  Companies,  Inc. (f/k/a Lee-GN 
         Holding Corp.) and subsidiaries of General Nutrition,  Incorporated 
         Registration Statement on Form S-1, Registration No.  33-31892.)

3.5      Restated  Certificate of Incorporation of General Nutrition  Companies,
         Inc. (f/k/a Lee-GN Holding Corp.),  filed with the Secretary of the
         State of Delaware on October 12,  1995.  (Incorporated  herein by 
         reference to Exhibit 3.1 to the General Nutrition Companies, Inc. 
         Registration Statement on Form S-3, Registration Statement 333-534.)
 
3.6      By-laws of  General  Nutrition  Companies,  Inc.  (f/k/a  Lee-GN 
         Holding  Corp.),  (Incorporated  herein by  reference  to Exhibit 3.13
         to the General Nutrition Companies, Inc. Registration Statement on Form
         S-1, Registration No.  33-43218.)

4.1      Specimen  certificate  for  shares of common  stock.  (Incorporated 
         herein by  reference  to  Exhibit 4.1  to the  Annual Report on Form 
         10-K of General Nutrition, Incorporated for the fiscal year ended 
         February 6, 1993.)

  10.1   Amended and Restated Employment Agreement between General Nutrition,
         Incorporated and Jerry D. Horn.

  10.2   Amended and Restated Employment Agreement between General Nutrition,
         Incorporated and William E. Watts.


Exhibit
Number

10.3     Fourth Amended and Restated Credit Agreement dated as of March 31, 
         1997 among General  Nutrition,  Incorporated and General Nutrition 
         Corporation,  as Borrowers,  Banque Nationale de Paris, New York Branch
         as Administrative  Agent and Documentation Agent,  PNC Bank,  National 
         Association  and ABNAMRO Bank N.V., as Syndication  Agents,  and the
         Banks named therein.  (Incorporated herein by reference  to Exhibit  
         10.18 to the Annual  Report on Form 10-K of General  Nutrition  
         Companies,  Inc. for the fiscal year ended February 1, 1997.)

10.4     Amended and Restated Standard Indemnity  Agreement dated  September 24,
         1992 between General  Nutrition,  Inc. and all its subsidiaries and
         Showa Denko America,  Inc.  (Incorporated  herein by reference to 
         Exhibit 10.13 to the Annual Report on Form 10-K of General Nutrition,
         Incorporated for the fiscal year ended February 6, 1993.)

10.5     Stockholders  Agreement  Amendment,  Consent and Waiver,  effective 
         November 25, 1991, to the General Nutrition  Companies, Inc. (f/k/a 
         Lee-GN Holding Corp.)  Stockholders  Agreement,  as amended.  
         (Incorporated  herein by reference to  Exhibit 10.45 to the General 
         Nutrition Companies, Inc. Registration Statement on Form S-1, 
         Registration No.  33-43218.)
 
10.6     Form of General  Nutrition  Companies,  Inc.  1989 Stock Option Plan. 
         (Incorporated  by  reference  to  Exhibit 4A  to the General Nutrition
         Companies, Inc. Registration Statement on Form S-8, Registration No. 
         33-58096.)
 
10.7     Form of General  Nutrition  Companies,  Inc. (f/k/a Lee-GN Holding 
         Corp.) 1991 Stock Option Plan.  (Incorporated  herein by reference to 
         Exhibit 10.47 to the General Nutrition Companies, Inc. Registration 
         Statement on Form S-1, Registration No. 33-43218.)

10.8     General  Nutrition   Companies,   Inc.  (f/k/a  Lee-GN  Holding  Corp.)
         Amended  and  Restated  1992  Stock  Option  Plan.(Incorporated  herein
         by reference to Exhibit 10.17 to the Annual Report and Form 10-K of
         General Nutrition  Companies,  Inc. for the fiscal year ended February
         5, 1994.)

10.9     Form of General Nutrition  Companies,  Inc. 1993 Stock Option Plan. 
         (Incorporated  herein by reference to Exhibit 10.24 to the Annual 
         Report and Form 10-K of General Nutrition Companies, Inc. for the 
         fiscal year ended February 5, 1994.)

10.10    Form of General  Nutrition  Companies,  Inc.  1993  Employee  Stock 
         Purchase  Plan.  (Incorporated  herein by reference to Exhibit 10.25 to
         the Annual Report on Form 10-K of General Nutrition Companies, Inc. for
         the fiscal year ended February 5, 1994.)

10.11    Form of General  Nutrition  Companies,  Inc. 1994 Stock Option Plan for
         Non-employee  Directors.  (Incorporated  herein by reference  to  
         Exhibit 10.26  to the Annual  Report and  Form 10-K  of General
         Nutrition  Companies,  Inc. for the fiscal year ended February 4, 
         1994.)

10.12    Form of General Nutrition  Companies,  Inc. 1995 Stock Option Plan. 
         (Incorporated  herein by reference to Exhibit 10.28 to the Annual 
         Report on Form 10-K of General Nutrition Companies, Inc. for the fiscal
         year ended February 4, 1995.)

10.13    Form of General  Nutrition  Companies,  Inc.  1996  Management  and  
         Director  Stock  Option Plan  (Incorporated  herein by reference to 
         Exhibit 4B to the General Nutrition Companies, Inc. Registration 
         Statement of Form S-8, Registration No. 333-21397.)

10.14    Form of General  Nutrition  Companies,  Inc. 1996  Management  and 
         Director  Stock  Purchase Plan  (Incorporated  herein by reference to 
         Exhibit 4A to the General Nutrition Companies, Inc. Registration 
         Statement on Form S-8, Registration No. 333-21397.)

10.15    Amendment Number 1 to the Amended and Restated Employment Agreement
         between General Nutrition, Incorporated and Jerry D. Horn.

10.16    Amendment Number 1 to the Amended and Restated  Employment  Agreement
         between General  Nutrition,  Incorporated and William E. Watts.

*10.17   Form of General Nutrition Companies, Inc. 1998 Management and Director
         Stock Option Plan.


Exhibit
Number

*10.18   U.S.  $100,000,000  1998 Term  Credit  Agreement  dated as of August 
         10,  1998 among  General  Nutrition,  Incorporated and  General
         Nutrition  Corporation,  as Borrowers,  and General Nutrition 
         Companies,  Inc. and the Lenders named therein, as Lenders, and Banque
         Nationale de Paris, as Administrative  Agent and as Documentation Agent
         and PNC Bank, National Association and ABN Amro Bank N.V. as
         Syndication Agents.

*10.19   Amendment No. 1 to the $100,000,000 1998 Term Credit Agreement dated as
         of December 16, 1998.

*21.1    Subsidiaries of General Nutrition Companies, Inc.

*23      Consent of Deloitte & Touche LLP.

*27      Financial Data Schedule.

*  Filed herewith.




                                                        SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                           GENERAL NUTRITION COMPANIES, INC.
                                           (Registrant)



May 7, 1999

                                           By: /s/ William E. Watts
                                           William E. Watts
                                           President and Chief Executive Officer

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
                 Name                                                 Title                                          Date

<S>                                                                                                                     <C> 
/s/  JERRY D. HORN                            Chairman of the Board                                          May 7, 1999
--------------------------------------
Jerry D. Horn

/s/ WILLIAM E. WATTS                          Director, President and Chief Executive Officer                May 7, 1999
--------------------------------------
William E. Watts

/s/ DAVID LUCAS                               Director                                                       May 7, 1999
--------------------------------------
David Lucas

/s/ RONALD L. ROSSETTI                        Director                                                       May 7, 1999
--------------------------------------
Ronald L. Rossetti

/s/ THOMAS R. SHEPHERD                        Director                                                       May 7, 1999
--------------------------------------
Thomas R. Shepherd

/s/ W. HARRISON WELLFORD                      Director                                                       May 7, 1999
--------------------------------------
W. Harrison Wellford

/s/ EDWARD G. BEINFOHR                        Director                                                       May 7, 1999
--------------------------------------
Edward G. Beinfohr

/s/ EDWIN J. KOZLOWSKI                        Executive Vice President, Chief Financial                      May 7, 1999
--------------------------------------
Edwin J. Kozlowski                            Officer, and Principal Accounting Officer

</TABLE>
                                 GENERAL NUTRITION COMPANIES, INC.
                              SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
    FOR THE YEARS ENDED FEBRUARY 6, 1999, JANUARY 31, 1998 AND FEBRUARY 1, 1997

<TABLE>
<CAPTION>
                                                                 Additions
                                                    -----------------------------------
                                 Balance at the     Charged to Costs                                           Balance at the
                                Beginning of the      and Expenses         Charged to                         End of the Period
       Classification                Period                              Other Accounts       Deductions
---------------------------    -----------------    ----------------    ---------------     --------------    ----------------

Allowance for Doubtful Accounts:

Year Ended February 6,
<S>                             <C>                         <C>                                       <C>       <C>        
   1999                         $    (1,816)          $     (173)          $       -          $       25        $   (1,964)
Year Ended January 31,
   1998                              (1,883)                (219)                  -                 286            (1,816)
Year Ended February 1,
   1997                              (2,521)                (280)                  -                 918            (1,883)

Inventory Shrink Reserve:

Year Ended February 6,
   1999                              (4,112)             (11,970)                  -              11,676            (4,406)
Year Ended January 31,
   1998                              (7,875)             (10,023)                  -              13,786            (4,112)
Year Ended February 1,
   1997                              (3,551)              (9,765)                  -               5,441            (7,875)

Inventory Obsolete Inventory
   Reserve:

Year Ended February 6,
   1999                              (2,555)                   -                   -                  46            (2,509)
Year Ended January 31,
   1998                              (3,059)                   -                   -                 504            (2,555)
Year Ended February 1,
   1997                              (1,791)              (1,268)                  -                   -            (3,059)

</TABLE>
 
INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholders of General Nutrition Companies, Inc.:

     We have audited the consilidated  financial statements of General Nutrition
Companies,  Inc. as of February 6, 1999 and January 31, 1998 and for each of the
years ended  February 6, 1999,  January 31, 1998 and February 1, 1997,  and have
issued our report  thereon  dated  March 3, 1999 (April 22, 1999 as to Note 19);
such report is included  elsewhere in this Form 10-K.  Our audits also  included
the consolidated  financial  statement schedule of General Nutrition  Companies,
Inc., listed in Item 14. This consolidated  financial  statement schedule is the
responsibility of the Company's management.  Our responsibility is to express an
opinion  based  on our  audits.  In our  opinion,  such  consolidated  financial
statement  schedule,  when  considered  in relation  to the basic  consolidation
financial  statements taken as a whole,  present fairly in all material respects
the information set forth therein.


DELOITTE & TOUCHE LLP




                                                         SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                       GENERAL NUTRITION COMPANIES, INC.
                                       (Registrant)


May 7, 1999

                                       By: /s/ William E. Watts
                                       William E. Watts
                                       President and Chief Executive Officer

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
                 Name                                                 Title                                          Date

<S>                                                                                                              <C>    
/s/  JERRY D. HORN                            Chairman of the Board                                          May 7, 1999
--------------------------------------
Jerry D. Horn

/s/ WILLIAM E. WATTS                          Director, President and Chief Executive Officer                May 7, 1999
--------------------------------------
William E. Watts

/s/ DAVID LUCAS                               Director                                                       May 7, 1999
--------------------------------------
David Lucas

/s/ RONALD L. ROSSETTI                        Director                                                       May 7, 1999
--------------------------------------
Ronald L. Rossetti

/s/ THOMAS R. SHEPHERD                        Director                                                       May 7, 1999
--------------------------------------
Thomas R. Shepherd

/s/ W. HARRISON WELLFORD                      Director                                                       May 7, 1999
--------------------------------------
W. Harrison Wellford

/s/ EDWARD G. BEINFOHR                        Director                                                       May 7, 1999
--------------------------------------
Edward G. Beinfohr

/s/ EDWIN J. KOZLOWSKI                        Executive Vice President, Chief Financial                      May 7, 1999
--------------------------------------
Edwin J. Kozlowski                            Officer, and Principal Accounting Officer


</TABLE>

                        GENERAL NUTRITION COMPANIES, INC.
                  SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
   FOR THE YEARS ENDED FEBRUARY 6, 1999, JANUARY 31, 1998 AND FEBRUARY 1, 1997

<TABLE>
<CAPTION>
                                                                 Additions
                                                    -----------------------------------
                                 Balance at the     Charged to Costs                                           Balance at the
                                Beginning of the      and Expenses         Charged to                         End of the Period
       Classification                Period                              Other Accounts       Deductions
---------------------------    -----------------    ----------------    ---------------     --------------    ----------------

<S>     <C>    <C>    <C>    <C>    <C>    <C>
Allowance for Doubtful Accounts:

Year Ended February 6,
   1999                         $    (1,816)                (173)                  -                  25        $   (1,964)
Year Ended January 31,
   1998                              (1,883)                (219)                  -                 286            (1,816)
Year Ended February1,
   1997                              (2,521)                (280)                  -                 918            (1,883)

Inventory Shrink Reserve:

Year Ended February 6,
   1999                              (4,112)             (11,970)                  -              11,676            (4,406)
Year Ended January 31,
   1998                              (7,875)             (10,023)                  -              13,786            (4,112)
Year Ended February1,
   1997                              (3,551)              (9,765)                  -               5,441            (7,875)

Inventory Obsolete
   Reserve:

Year Ended February 6,
   1999                              (2,555)                   -                   -                  46            (2,509)
Year Ended January 31,
   1998                              (3,059)                   -                   -                 504            (2,555)
Year Ended February1,
   1997                              (1,791)              (1,268)                  -                   -            (3,059)

</TABLE>