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Nu Skin, Amway Find Sales Slipping Due to Challenges in China

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by Kate Lloyd -

The major beauty multi-level marketers (MLMs) Nu Skin Enterprises  and Amway recently experienced decreases in revenue, largely due to business disruptions and currency fluctuations in China.

Nu Skin’s revenue during the first quarter of 2015 (Q1) fell 19 percent (to US$543.3 million) compared to the same period last year, according to a regulatory filing. In February, Amway announced that its 2014 sales declined 8 percent year-over-year to $10.8 billion. Nu Skin’s Q1 sales plunged 37 percent in mainland China to $134.2 million and 33 percent in greater China to $187.4 million. In Europe, the Middle East and Africa, sales decreased 27 percent to $33.2 million. However, Canadian and U.S. sales rose 3 percent to $68.6 million over the same period the prior year.

Nu Skin revealed its business in China was disrupted after the company suspended business meetings and temporarily discontinued accepting applications for new sales representatives after the company fell under regulatory scrutiny in January 2014. Nu Skin resumed meetings and application acceptance in May 2014.

In addition, Nu Skin reported foreign currency fluctuations negatively impacted its revenues by 7 percent during the first quarter. However, the company said it expects the strengthening U.S. dollar to impact results for the rest of 2015.

Though Nu Skin’s management expects trends in China to improve, J.P. Morgan analysts said in a research note they would need to see “an uptick in the sales leaders there to get comfortable with that notion." And while Nu Skin attributed lower Q1 revenues in China to increased promotional activity during the previous quarter, as well as seasonality, J.P. Morgan analysts said weaker sales in China may indicate a “lack of visibility for turnaround."

Nu Skin learned in April that the Securities and Exchange Commission was investigating certain aspects of its operations in China, specifically regarding a charitable donation Nu Skin made in 2013 and related issues, according to a regulatory filing.

In spite of the regulatory headwinds, Nu Skin’s management expressed optimism about the future. In a statement accompanying its Q1 results, Nu Skin CEO Truman Hunt cited “growing enthusiasm" among its sales force ahead of the rollout of new skin care and nutritional products. Nu Skin plans to introduce an anti-aging supplement and anti-aging skin care system. The company also said it is rolling out a line of cosmetic oils in Mainland China. “While currency headwinds proved to be slightly more challenging than expected, we continue to believe we are well positioned for growth in the back half of the year," Hunt said.

Nu Skin is not the only MLM that has endured challenges in China. Amway attributed its 8-percent sales decline in 2014 to lower revenues in China and fluctuation in exchange rates. The company predicts a turnaround in coming years, as growth rates in China during the past five and 10 years were around 27 percent and 45 percent, according to a company release. Despite decreasing revenues in 2014, China remains Amway’s largest market.

In 2014, Amway’s beauty products comprised 25 percent of sales, behind nutrition products (43 percent) but ahead of durable products (19 percent), home care products (8 percent) and other offerings (5 percent).

For additional insight into China’s regulatory system, along with an update on the country’s ingredient supply chain and tips to facilitate business interactions in China, be sure to download INSIDER's new Doing Business in China Digital Pulse.

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