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June 01, 2016

Financial News

Public Direct Sellers Post First Quarter 2016 Results

by Andrea Tortora

Click here to order the June 2016 issue in which this article appeared or click here to download it to your mobile device.

The economic outlook for 2016 remains strong among the largest publicly traded direct selling companies, despite some declines. Quarterly financial results reported in April and May reveal better-than-expected outcomes and sales, despite continued pressure from a strong dollar overseas. And in many cases, companies are reiterating or boosting their 2016 outlooks. Here we focus on nine of the largest—Herbalife, USANA, Primerica, Medifast, Nu Skin, Natural Health Trends, Nature’s Sunshine, Tupperware and Avon.

Herbalife made big gains and beat Wall Street expectations by reporting year-over-year sales growth for the first time in many months. In the first quarter Herbalife earned net income of $95.8 million or $1.12 per diluted share. That’s up 22.5 percent compared to $78.2 million or 92 cents per share a year ago during the same time period. Net revenue jumped to $1.1 billion, up 1 percent as reported and 11 percent on a constant currency basis. “We’ve started the year by exceeding EPS guidance on both the top and bottom line and by returning to reported net sales growth, year over year, for the first time in five quarters,” says Michael Johnson, Chairman and CEO. Herbalife’s biggest gains came from China, which saw sales jump 32 percent to $217.4 million. North America (9 percent growth to $246 million) and the EMEA countries (6 percent growth to $198.4 million) reported the next largest expansions. This momentum pushed Herbalife to raise its full year 2016 adjusted diluted EPS guidance to between $4.40 and $4.75, up from $4.05 to $4.50. Herbalife also reported that it is in advanced talks with the Federal Trade Commission to settle an investigation into allegations that the company is a pyramid scheme. If the settlement is reached, Herbalife told investors it expects the terms to include injunctive and other relief as well as a monetary payment of approximately $200 million.

Utah health sciences company USANA posted net income of $22.3 million, or $1.77 a share, on record sales of $240.4 million. Revenue rose 9.6 percent for the fiscal first quarter that ended April 2, up from $219.4 million in the prior-year period. The number of new associates grew 16.2 percent to 437,000. “USANA delivered solid performance in the first quarter, notwithstanding the continued impact of a stronger U.S. dollar and a tough prior year comparable,” says Dave Wentz, Co-CEO. Wentz says the dollar’s strength negatively impacted net sales by $14.2 million in the first quarter. On a constant currency basis, revenue increased by 16.1 percent. Even so, sales are up across Asia: 15.5 percent in Greater China, 14.4 percent in North Asia and 7.8 percent in the Southeast Asia Pacific region. In the Americas/Europe overall revenue growth is flat, with big gains in Canada (up 22.1 percent) and Mexico (up 16.0 percent).

Georgia-based Primerica also was a strong performer, with revenue up 6 percent to $363.0 million and net operating income increasing 7 percent to $45.7 million, or 92 cents per share. The growth comes from continued strong sales of Primerica’s term life insurance product and 10 percent growth in the number of new sales associates joining the firm, to 108,200. CEO Glenn Williams says the increase in associates drove a 19 percent growth in life insurance policies issued. “We have begun 2016 with strong distribution growth,” Williams says. “Solid core performance across business segments coupled with recent share repurchases resulted in a 17 percent increase in diluted operating EPS.”

Medifast exceeded its company guidance in the first quarter, increasing its fiscal year 2016 outlook. The Maryland company makes and distributes weight-loss and healthy living products. For its Take Shape For Life direct sales business unit, Medifast reported a revenue increase of 9 percent to $56.7 million in the first quarter, up from $52.1 million a year ago. This is the fifth straight quarterly improvement in the year-over-year trend. Overall, Medifast’s first quarter adjusted income from continuing operations was $5 million, or 42 cents per diluted share, down 10.7 percent when compared to adjusted income from continuing operations of $5.6 million, or 46 centsper diluted share in the first quarter of 2015. “We are pleased with our start to 2016, particularly as momentum accelerated in our Take Shape For Life business segment,” says CEO and Chairman Michael MacDonald. “Going forward, we remain focused on taking steps to optimize each of our business units, by differentiating products, programs, and service offerings.”

Nu Skin reported better-than-expected numbers for the quarter, but its revenue and income were significantly lower than prior-year results because of margin declines. The Utah skincare and nutritional products retailer raised its outlook for 2016 based on new product launches and a favorable view on currency. Nu Skin reported net income of $3.3 million, or 6 cents a share, on revenue of $471.8 million, down 13.2 percent from $543.3 million a year ago. Revenues are taking a hit from currency headwinds, yet they were higher than Nu Skin’s guidance of $450 million to $470 million. “Our first-quarter performance was in line with our expectations and we are optimistic about the impact of upcoming product launches, which began in April and will continue in the second quarter,” said Truman Hunt, President and CEO.

Natural Health Trends Corp., a personal-care and wellness company, showed tremendous double-digit revenue growth in the first quarter, mostly driven by continued growth in the Hong Kong market, which represents 92 percent of total revenue. For the first quarter, NHT reported net income of $11.3 million, or 95 cents a share, on revenue of $74.3 million, up 83 percent from $40.7 million a year ago. The number of active members increased 93 percent to 119,800 up from 62,010 in the same period in 2015. “Our positive momentum continued with a strong start to 2016,” commented Chris Sharng, President of Natural Health Trends Corp. “The double-digit increase in revenue growth for the quarter was driven by our emphasis on leadership programs, product development and promotional incentives.”

Supplement maker Nature’s Sunshine Products saw its overall sales drop by 1.8 percent to $82.4 million in the first three months of 2016, down from $83.8 million a year ago, due to unfavorable exchange rates in some markets. Revenue grew for the seventh consecutive quarter for NSP United States and NSP Canada, generating a 0.3 percent jump to $38.3 million for NSP North America overall. Net income was $1.8 million or 11 cents a diluted share, down from $4.2 million or 23 cents a diluted share in the first quarter of 2015 due to Nature’s Sunshine Products’ investment in China of 7 cents a share, and unfavorable changes in the effective tax rate of 2 cents a share. Despite the declines, Gregory Probert, Chairman and CEO says he is pleased because the numbers “reflect the progress we have made toward returning Nature’s Sunshine to sustainable, long-term growth.” Subsidiary Synergy WorldWide reported its best first quarter ever, with revenue jumping 3.8 percent to 29.8 million. Probert said Nature’s Sunshine continues to make progress in China and is on-track to receive its direct selling license in the third quarter of 2016.

Florida-based Tupperware, which faces tough prospects in many emerging markets and saw big impacts from currency fluctuations, remains optimistic for 2016. Tupperware’s first quarter net income was $43.4 million, or 91 cents (diluted) a share, on revenue of $525.7 million, down 9.6 percent from $581.8 million during the same period a year ago. In constant dollars, sales grew 1 percent. “While we continued to achieve strong performances in Argentina, Brazil, China, Tupperware Mexico and Tupperware U.S. and Canada, we have continued to need to navigate through economic and political headwinds,” says Rick Goings, Chairman and CEO. “Even so, we were able to come in above the high end of our diluted earnings per share range, reflecting lower resin costs and our initiatives to manage costs, gross margin and leverage under our promotional programs, as well as improved exchange rates.” The first quarter performance prompted a full-year outlook increase of 28 cents on GAAP basis (or 21 cents) to $4.28 to $4.38 a share.

Avon Products reported declines across the board, but CEO Sheri McCoy said the results were in line with company expectations and should improve as the company executes on its transformation plan. Total revenue dropped 16 percent to $1.3 billion, but increased 2 percent in constant dollars. Excluding the sale of Liz Earle, revenue was up 3 percent in constant dollars. Avon’s loss per share was 38 cents on a net loss of $165.4 million. “Since sharing the (transformation) plan with the investment community in January, we have successfully completed the sale and separation of the North America business, implemented a new organizational structure, identified actions to deliver our 2016 savings targets, and reconstituted our Board of Directors,” McCoy says. “With these actions, we are well-positioned as we move forward aggressively to drive out cost, invest in growth, and improve our financial flexibility.”