Global expansion, improved recruitment and in-person events drive profits
Slumping sales in North America and China sent Herbalife to a 70% nosedive in first-quarter profit to $29.3 million.
The MLM giant reported sales during the first three months of the year were down by 6.3% to about $1.3 billion. That includes an 8.9% decline in North America, and continued sluggish performance in China, where sales dipped 36% compared to the same period a year ago.
CEO Michael Johnson said despite plunging revenue, the company will grow and results will improve.
“We’re evolving. And that’s what’s been happening over the last six months, and it’s going to continue,” Johnson told analysts during a recent earnings call. “We still aren’t where we want to be, but we have embarked on a significant journey.”
Revenue in every global region declined during the quarter, except in Latin America, where sales increased by 2.5% to $205 million. The LatAm region was boosted by 8% year-over-year sales growth in Mexico, and a 4% bump in Brazil, which executives said on the earnings call “is returning to growth after several challenging years.”
In China, Herbalife sales have plummeted in recent years, as stringent COVID-19 policies locked down the entire country for much longer than anywhere else in the world.
The country alone accounted for nearly 23% of all Herbalife sales in the third-quarter of 2020, months after the pandemic spread globally and during a period when the company was reporting record revenue. As of the first quarter of this year, revenue from China now makes up roughly 5% of overall sales.
Yet, Herbalife executives remain upbeat about the future in China. In-person meetings in the country, Johnson said, have returned in the last couple of months, and Herbalife Nutrition Clubs—brick-and-mortar locations operated by distributors selling Herbalife shakes, teas and products—are starting to reopen.
“You’ve got to realize that in China, when they went into lockdown, it was much different than any place on the face of the earth. It was a true lockdown,” Johnson said. “Without being too positive here or too negative, I think we’re going to see some interesting news out of China over the next couple of quarters.”
Herbalife did not provide fiscal 2023 guidance, citing as a reason the “rapidly shifting macroeconomic sentiment and backdrop, as well as increased volatility in the market.”
Overall, Johnson said the company is encouraged by improving trends in some areas—what he called “early rays of light, some bright spots”—including the smallest year-over-year total sales decline on a constant currency basis, and predicts a reversal of the negative sales trend by the end of the year.
“Our trends tell us we will see growth in the fourth quarter,” Johnson said.
- Total Sales: $1.3 billion, down 6%
- Total Profit: $29.3 million, down 70%
- North America Sales: $297.2 million, down 9%
- Europe and the Middle East Sales: $262 million, down 9%
- Latin America Sales: $205 million, up 2%
- Asia Pacific Sales: $413 million, down 9%
- China Sales: $67 million, down 36%
Return of In-Person Events Provides ‘Momentum, Increased Engagement’
During the call with analysts, Johnson highlighted Herbalife’s return to in-person events, saying the company had held 700 face-to-face gatherings since the beginning of this year, which has allowed the company to reach an audience of 400,000 people.
Those meetings, Johnson said, gave the company a jolt of momentum and increased engagement by providing a forum for training, mentoring and to launch new products. And they’re a central component of the company’s plans to return to growth by the end of the year.
Herbalife has 10 regional events planned for the rest of 2023, Johnson said, including gatherings in Lima, Peru; Bangalore, India; Singapore, Singapore; and San Antonio, Texas, in the next three months.
“Distributors will leave these events more energized and motivated with enhanced knowledge, training and an opportunity and a plan to expand their businesses,” he said.
“We will be exchanging different unique successful sales methods, opportunities for distributors to train, mentor, motivate, inspire, and learn from distributors.”
USANA Health Sciences reported better-than-expected earnings in the first quarter, as increased customer activity in Asia helped counter double-digit declining sales in the U.S. and Europe.
CEO Kevin Guest told analysts during a recent earnings call that the company is off to a solid start to the year.
USANA reported profit declined to $18.4 million, down 18%, during the quarter that ended April 1. Total revenue for the quarter was $248 million, a 9% decrease compared to a year ago.
Sales in the Americas and Europe declined by 11% in the first quarter to $49 million. In China, the company’s largest market, sales were down 3% on a constant currency basis.
However, USANA handily beat Wall Street revenue and earnings estimates, and company executives said they are seeing active customer counts stabilize and sequential quarter net sales growth due to several initiatives.
There are also positive signs that have emerged in China. Global sales declines in recent quarters can be largely attributed to disruptions and lockdowns in China related to COVID-19, as well as inflationary pressures and economic slowdowns in other regions.
The company benefited during the first few weeks of the first quarter from increased demand for several health products in China following the government’s shift in COVID-19 policy.
Demand started to increase at the end of 2022, when China lifted its COVID lockdown, and carried over into the first quarter and added $12 million in net sales, Guest said.
However, Guest called it a “temporary lift in net sales.” Also during the quarter, USANA experienced another temporary boost as some customers ramped up buying—$13 million of customer purchasing activity—ahead of the annual price increases.
Executives said global inflationary pressures continue to”meaningfully” impact USANA’s business.
Despite economic challenges, USANA said demand for health and wellness products continues to be strong, “and we remain well positioned to execute our growth strategy.”
Part of that strategy this year will include a heavy focus on live in-person events, Guest said, targeted at “engaging and further incentivizing our sales force.”
The company is also planning to focus on more localized and smaller promotions in 2023 instead of the historical single or large promotions it has held in recent years.
The company said that its strategy of focusing on live events and smaller, more focused, promotions will generate growth in the long-term.
USANA said it expects full-year revenue in the range of $875 million to $950 million.
- Total Sales: $248 million, down 9%
- Total Profit: $18.4 million, down 18%
- Asia Pacific Sales: $200 million, down 9%
- China Sales: $124 million, down 7%
- Americas and Europe Sales: $49 million, down 11%
Guest, who has been CEO since 2015, is preparing to leave the top spot on July 1 and transition to executive chairman. USANA President Jim Brown will take over as CEO.
Guest used a short portion of the earnings call to highlight the upcoming shift in leadership, saying he has full faith in the company’s future CEO.
“I look forward to continually being deeply involved in USANA’s strategy and mission,” Guest said. “In this new role, I want to express that I am not retiring; I’m just shifting strategic roles. I also want to express my sincere appreciation for and confidence in Jim as USANA’s CEO, as well as USANA’s extraordinary management team employees and associates.”
USANA Global Footprint Grows
During the earnings call, USANA executives also teased an impending global expansion announcement, in what would be the company’s first new market in five years.
At the time of the call, USANA declined to name the new market it was planning to move into, but Guest said it will open later this year, and “we are optimistic about the long-term growth opportunities it will present.”
Turns out that market is India. Expansion into India increases USANA’s global footprint to
The company expects to launch operations in India near the end of the third quarter of 2023, and said it anticipates it will contribute “modestly” to sales during the fiscal year.
“We have spent several years of extensive research and meticulous work to prepare for this expansion into India,” Brown said in a press release announcing the India expansion plans.
“We are confident that our products and business model are ideally suited for India, and we believe in our team’s ability to develop and grow this important market as we work toward our vision of creating the healthiest family on earth.”
The Georgia-based financial firm reported a first-quarter earnings increase of roughly 9%, buoyed by growth in its life insurance division and improved results in its senior health business.
Meanwhile, economic uncertainty and stock market volatility continued to hammer Primerica’s investment and savings segment, which was down 25% year-over-year on sales of $2.3 billion.
Primerica is a direct seller of term insurance policies and annuities, along with other financial and investment services.
For the quarter, the company reported a profit of $125 million on sales of $690 million.
Results from the first three months of the year reflected continued growth of adjusted direct premiums in the company’s life insurance division, along with progress in improving the profitability of its senior health segment, CEO Glen Williams told analysts during an earnings call.
Life insurance products introduced last fall have boosted the sales force’s enthusiasm, he said. During the quarter, the company said it issued 84,500 new life insurance policies, a 2% year-over-year increase, and estimated that annualized life insurance premiums were up 6% to $89 million.
Primerica acquired TeleQuote, a provider of senior health insurance and a distributor of Medicare-related insurance policies, in July 2021, but the segment has underperformed consistently since the acquisition.
That’s starting to turn around, Williams said. Results for the first quarter were in line with expectations, and profitability metrics are improving, which he called “encouraging.”
A lucrative part of Primerica’s business—its Investment and Savings Product—reported sales of $2.3 billion, down 25% compared to the prior year period. That sales downtrend is expected to continue, as the company projects ISP sales could decline between 7% to 10% in the second quarter due to continued economic uncertainty.
Along with lower sales, revenue decreased in the investment and savings segment by 13% to
- Total Profit: $125 million, up 9%
- Total Sales: $690 million, down 2%
Primerica had quite a successful quarter when it comes to recruiting.
About 93,500 new people joined the company in the first three months of the year, a 10% increase year over year. Additionally, more than 11,000 new life-insurance licensed reps were added during the quarter, an 11% increase.
Williams said the company has been able to achieve sales force growth this quarter with no incentives—“it was good fundamentally sound growth in the quarter.”
“What we’re seeing is that we’re getting better at telling our story,” he told analysts. “There’s a better story to tell with our success as we go forward. We just see the desire in a disrupted
kind of employment dynamic of people looking for alternatives, looking for additional part-time income to offset the higher cost of living or looking for alternative career paths.”
The nutritional and personal-care products maker reported a profit of $860,000 during the first-quarter and is predicting modest sales growth for the full year.
CEO Terrence Moorehead told analysts in a recent earnings call that the company started the year on a strong note, as figures for the first-three months of the year exceeded Wall Street expectations.
Nature’s Sunshine’s reporting of $860,000 profit this quarter comes as the company netted a $3 million loss during the same time period a year ago, grappling with global supply chain issues and inflationary pressures that offset an overall sales increase.
Sales were $108 million for the quarter, down 2%. The decline was largely driven by sales drop-offs in China and North America.
But Moorehead said the Asia region as a whole performed strong, delivering first-quarter sales that were up 9% on a constant currency basis. Taiwan and Japan were the two best-performing markets in the region.
Moorehead added that the company is seeing encouraging signs in China, where sales momentum is building each month.
“We continued to operate in an extremely challenging external environment,” Moorehead said, “but the underlying fundamentals and strength of our business remained firmly intact, and the steps we’ve taken to create a more consumer-focused business continued to help us build momentum in the quarter.”
Nature’s Sunshine said it is forecasting “low- to mid-single-digit revenue growth” for the year.
- Sales: $108 million, down 2%
- Profit: $860,000, up from a $3 million loss
- Asia: $46.3 million, flat
- Europe: $21.4 million, down 2%
- North America: $34.6 million, down 4%
- Latin America and Other: $6.2 million, down 6%
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