Hank Schultz, Senior Editor

February 22, 2023

4 Min Read
Inflation, pandemic and war depress sales at Herbalife, Nu Skin

Inflation, pandemic lockdown hangovers in some markets and fallout from the war in Ukraine continue to depress sales and cut the earnings of most of the major network marketing companies selling natural products.

In the recent round of earnings reports, Herbalife Nutrition Ltd., Nu Skin Enterprises Inc. and USANA Health Sciences Inc. all reported significant sales declines year over year. But these companies’ typically healthy margins, combined with cost savings measures, enabled all three to still record profits.

Herbalife, Nu Skin and USANA are heavy hitters in the network marketing lineup. In the annual rankings of MLMs (multi-level marketers) based on revenues recorded by industry publication Direct Selling News, Los Angeles-based Herbalife ranked No. 3 globally with $5.8 billion in revenue in 2021, Nu Skin came in at No. 8 (Provo, Utah; $2.7 billion) and USANA ranked No. 14 (Salt Lake City, Utah; $1.2 billion).

Sales for Herbalife, USANA take drubbing

Herbalife recently reported fourth-quarter net sales of $1.2 billion, which was a 10.4% decline year over year. Full year net sales totaled $5.2 billion, which was also about a 10% decline, or a true 5% decline on a constant currency basis. 

“The company believes that macroeconomic inflationary pressures continued to challenge members’ operations and customer demand during the quarter,” Herbalife said in management commentary.

Because of a concerted cost-cutting effort, the company still managed to earn more than $3 a share.

Herbalife CEO Michael Johnson assumed the reins again at the end of October after previous CEO John Agwunobi was abruptly ousted. Part of the turnaround plan for Herbalife, Johnson said, is to better fit its product lineup to the modern market.

“We started out as a weight loss company. We shifted to a high-performance nutrition company,” Johnson said during an earnings call with analysts. “Our product today is one of the best meal replacements there is out there. But we have to get more in tune with what's going on out there in the sleep horizon and the anxiety horizon.”

Herbalife declined to provide guidance for the upcoming year.

Stock traders have been bearish on the company, sending its stock price plummeting more than 53% over the past year. That decline came in the context of an overall stock market that has fared better over the same time frame, with the Dow off by 1.4% over the past 12 months and the Nasdaq down 14%.

USANA, which generates a large chunk of its annual revenue from sales in China, listed inflation as its primary concern.

“Global inflationary pressure continued to negatively impact our materials and supply chain costs as well as our consumers’ purchasing behavior across several key markets,” said CEO Kevin Guest.

USANA’s fourth-quarter revenue fell by more than 14% to $228 million. For the full year, sales decreased to $999 million, off from $1.19 billion in 2021. 

Even with the plummeting sales, the company still earned almost $3.60 a share in the fourth quarter. USANA’s share price is off more than 30% in the past year.

Nu Skin’s cost cutting efforts recognized

Nu Skin, another company that derives a significant amount of revenue in China, largely attributed lockdown issues there for its revenue shortfall. Its fourth quarter sales fell more than 22% year over year to $522 million.

“The majority of the year-over-year decline in our business was due to strict Covid-related factors in China, which accounted for approximately $208 million of the revenue shortfall,” said CEO Ryan Napierski.

He also said the company is feeling the effects of the ongoing war in Ukraine, which has disrupted its business in Europe.

“We have discussed the impact in EMEA (Europe, Middle East and Africa) of the ongoing conflict, energy crisis and inflationary pressures on consumer spending and our business activities throughout the region. We know that without these external disruptions, our social commerce model works in EMEA,” he said.

Like Herbalife and USANA, however, Nu Skin’s cost-cutting efforts showed fruit. Financial services firm D.A. Davidson said Nu Skin showed a commitment to keep expenses in check during a tumultuous period.

“In dollars, G&A expense was -23% to $128M, much lower than our estimate of $145M,” the firm wrote in institutional equity research published Feb. 16.

Stock traders seem to have rewarded the company for attention to this detail. Nu Skin’s stock price is off by almost 20% over the past year, meaning it escaped some of the worst of the damage inflicted on the sector by a jittery market.

The statements by company officials in this news report were taken from transcripts of earnings calls posted on the site seekingalpha.com.

About the Author(s)

Hank Schultz

Senior Editor, Informa

Hank Schultz has been the senior editor of Natural Products Insider since early 2023. He can be reached at [email protected]

Prior to joining the Informa team, he was an editor at NutraIngredients-USA, a William Reed Business Media publication.

His approach to industry journalism was formed via a long career in the daily newspaper field. After graduating from the University of Wisconsin with degrees in journalism and German, Hank was an editor at the Tempe Daily News in Arizona. He followed that with a long stint working at the Rocky Mountain News, a now defunct daily newspaper in Denver, where he rose to be one of the city editors. The newspaper won two Pulitzer Prizes during his time there.

The changing landscape of the newspaper industry led him to explore other career paths. He began his career in the natural products industry more than a decade ago at New Hope Natural Media, which was then part of Penton and now is an Informa brand. Hank formed friendships and partnerships within the industry that still inform his work to this day, which helps him to bring an insider’s perspective, tempered with an objective journalist’s sensibility, to his in-depth reporting.

Harkening back to his newspaper days, Hank considers the readers to be the primary stakeholders whose needs must be met. Report the news quickly, comprehensively and above all, fairly, and readership and sponsorships will follow.

In 2015, Hank was recognized by the American Herbal Products Association with a Special Award for Journalistic Excellence.

When he’s not reporting on the supplement industry, Hank enjoys many outside pursuits. Those include long distance bicycle touring, mountain climbing, sailing, kayaking and fishing. Less strenuous pastimes include travel, reading (novels and nonfiction), studying German, noodling on a harmonica, sketching and a daily dose of word puzzles in The New York Times.

Last but far from least, Hank is a lifelong fan and part owner of the Green Bay Packers.

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