September 01, 2016
Second Quarter Results a Mixed Bag for Public Companies
by Andrea Tortora
The midyear economic outlook for 2016 is mixed for the largest publicly traded direct selling companies in the U.S., with some posting better-than-expected second quarter results while others saw decline. Second quarter and midyear financial data reported in July and August reveals continued pressures from the impact of foreign exchange rates. Yet despite the strong U.S. dollar, businesses are seeing sales growth in Asia, particularly in China.
Among the more interesting stories is that of Avon Products Inc. (AVP—NYSE), which saw sales decline in all markets but posted a profit of $33 million or 6 cents a share, compared to $28.8 million in the same period a year ago. The results beat analyst estimates, which predicted earnings of 2 cents a share.
The solid performance is a sign that the company’s cost-cutting plan is beginning to have an impact. Avon shed its North American business in March and is moving its headquarters to the United Kingdom. The plan is expected to save Avon $350 million a year before taxes after three years, including $70 million in savings in 2016.
Total revenue was $1.43 billion, down from $1.56 billion, but CEO Sheri McCoy says there is top-line growth in nine of the company’s top 10 markets.
“While we recognize that it’s still early in our transformation and much effort and work lay ahead, I remain confident. Avon is on a path to sustainable, profitable growth,” McCoy says.
Herbalife Ltd. (HLF—NYSE), which settled an investigation of its business practices in July, reported a loss in the second quarter of $22.9 million or 28 cents a share. That’s down from earnings of 97 cents a share for the prior-year quarter. The second quarter loss includes a $203 million regulatory fine that Herbalife agreed to pay in its settlement with the Federal Trade Commission.
Excluding these items, adjusted earnings were $1.29 a share, up 4 percent from $1.24 a share a year ago.
Sales rose 3 percent to $1.2 billion, with midyear sales totaling $2.3 billion.
“This is a fantastic and historic quarter for Herbalife,” says Michael Johnson, CEO of the Los Angeles-based company. “Our momentum and performance reflects the strength of our distributors’ businesses. And with the regulatory settlement behind us, we’ve never ever been more focused.”
Nu Skin Enterprises Inc. (NUS—NYSE) is making a positive turnaround with $600 million in second quarter sales, up 7 percent from $560.2 million in the same period a year ago.
The Utah skincare and nutritional products business reported earnings of 79 cents a share, up slightly from 75 cents a share a year ago.
Nu Skin saw growth in three markets: South Asia-Pacific, 36 percent; Greater China, 18 percent; and EMEA, 6 percent. It posted declines in two markets: North Asia, -4 percent, and Americas, -19 percent.
China is the company’s largest area, with 37 percent of Nu Skin’s sales. To better compete, Nu Skin will launch products specific to China, such as an air filter for home use.
“We remain optimistic about the future as we continue to introduce our latest ageLOC products,” says Truman Hunt, President and CEO.
USANA Health Sciences Inc. (USNA—NYSE) beat analyst estimates for the second quarter with record net sales of $258.5 million, up 10.8 percent from $233.2 million a year ago. (Analyst estimates predicted an EPS of $1.93 on $252 million in revenue.)
Earnings per share increased by 7.8 percent to $2.07 a share, up from $1.92 a year ago. The increase in EPS is mostly due to USANA’s stock buyback program during the past 12 months.
“USANA generated solid results during the second quarter, which were in line with our expectations,” says Dave Wentz, USANA’s Co-CEO.
The Salt Lake City company saw strong growth in Asia, despite a negative impact from a stronger U.S. dollar. Net sales in the Asia-Pacific region increased 15.1 percent to $194.2 million. Currency fluctuations delivered a negative $9.5 million impact.
Primerica Inc. (PRI—NYSE) beat analyst estimates with second quarter earnings growth of 8 percent on total revenue of $379.2 million, compared to the second quarter of 2015. Operating revenue jumped 7 percent to $375.8 million for the quarter.
Diluted earnings per share were $1.19. That’s an increase of 27 percent and 13 cents better than the analyst estimate of $1.06.
The Duluth, Georgia, company reported growth in its life insurance segment with a 14 percent boost in life insurance policies issued and an 11 percent increase in life insurance licensed representatives to 112,365.
CEO Glenn Williams says Primerica continues to see strong performance throughout the business.
“Our salesforce leaders delivered distribution growth and strong life insurance productivity in the second quarter,” Williams says.
Tupperware Brands Corp. (TUP—NYSE) saw sales continue to decline in the second quarter with revenue of $564.7 million, down 4 percent from $588.9 million in 2015.
The Florida company reported a profit of $52.4 million or $1.03 a share, down from $62 million and $1.23 a share a year ago.
The latest results follow a 10 percent revenue decline in the first quarter. For the year, sales are down 7 percent compared to the first half of 2015.
Sales were strong in South America, up a total of 8 percent for the region. Brazil showed an increase of 22 percent. Tupperware U.S. and Canada reported a 1 percent sales increase.
Rick Goings, Chairman and CEO, said the quarter’s results show the strength of Tupperware’s products and people. Even with a 4 percent decline and a 7-point hit from exchange rates, “we grew sales by 3 percent in local currency—the high end of our range, with significant contributions from Brazil, China, Malaysia/Singapore and Tupperware Mexico.”
Medifast Inc. (MED—NYSE), a Maryland healthy lifestyle company, posted second quarter earnings of $3.4 million or 29 cents a share, down from $6.2 million or 48 cents a share in the same period a year ago.
Adjusted income was $7.5 million or 63 cents a diluted share.
Overall revenue was $71.1 million, down from $72.2 million in the second quarter in 2015. A majority (80 percent) of Medifast’s revenue came from Take Shape For Life, the direct sales segment of the company. With revenue of $57.4 million, the division grew 10 percent. This is the sixth quarter of year-over-year growth for Take Shape For Life. Medifast is heavily investing in the business segment, which marked its highest level of year-over-year growth in three years.
“Our team’s efforts to better differentiate our business segments and highlight their respective value propositions helped to fuel solid financial performance in the quarter,” says Michael MacDonald, Chairman and CEO.
Natural Health Trends Corp. (NHTC—NASDAQ) manufactures personal-care and wellness products. The California firm saw total revenue increase 15 percent to $80.4 million, compared to $69.7 million in the second quarter of 2015.
Net income was $12.2 million, or $1.07 a diluted share, compared to $12.3 million, or 98 cents a diluted share, in the second quarter of 2015.
Revenue from NHT’s Hong Kong operations, which represent 91 percent of total revenue, increased 13 percent to $73.3 million, compared to $64.8 million in the second quarter of 2015.
Revenue outside of Hong Kong increased 43 percent to $7 million, compared to $4.9 million in the second quarter of 2015.
“Going forward, we will remain focused on expanding our global footprint, continuing to acquire members in new and existing markets, as well as our product development initiatives to drive sustainable, long-term growth,” says President Chris Sharng.
Mannatech Inc. (MTX—NASDAQ) a Texas-based health and wellness company, reported a loss in the second quarter of $1.3 million, or 49 cents a share, compared with a profit of $3.1 million, or $1.15 a share, in the second quarter of 2015.
But sales were the highest the company has seen in seven quarters. The results come after a company rebranding, in which Mannatech invested in a new brand, infrastructure technology and the release of 13 new products. Sales in the U.S. and Korea of a new fat-loss system called TruHealth positively impacted financial results.
TruHealth will rollout globally throughout 2016.
Recruiting of salespeople grew 11 percent, with new independent associates in the second quarter totaling 28,400 compared to 25,600 a year ago.
Mannatech’s overall revenue was $48.8 million, up 4.5 percent from a year earlier.
Nature’s Sunshine Products Inc. (NATR—NASDAQ) saw second quarter net sales revenue of $89.4 million, up 10 percent compared to sales of $81.2 million in the second quarter a year ago.
This marks the eighth consecutive quarter of net sales growth for the company’s operations in the U.S. and Canada.
The natural health and wellness company said it recorded net income of $2.4 million for the quarter, or 14 cents per common diluted share. On a local currency basis, net sales revenue jumped 11.5 percent.
The Lehi, Utah-based company’s Synergy Asia division delivered 28.5 percent local currency growth in the second quarter.
‘For the first half of 2016, net sales revenue hit $171.8 million, up 4 percent from $165.1 million compared to the first six months of 2015. The growth is driven by an $8.9 million or 23.7 percent increase in Synergy Asia and an incremental net sales revenue increase of $4.4 million related to sales through Hong Kong