CEOs report a ‘turbulent,’ ‘volatile,’ and ‘challenging’ Q3
By: Dave Rauf
“As we look ahead, we anticipate continued COVID-related inflationary and economic challenges in many of our markets.” —Kevin Guest, CEO, USANA
USANA Health Sciences reported a turbulent third quarter, as inflationary pressure coupled with COVID-19 disruptions in Asia led to double-digit sales and profit declines.
The weaker-than-expected performance during the quarter prompted USANA to lower its full-year guidance for 2022, as the company reported lower sales than the same period a year ago in all of its markets.
Overall, USANA said sales for the most recent three-month period totaled $233 million, down 15 percent from the same time a year ago. The company also reported a massive dip—48%—in profit for the quarter, reporting net earnings at $14.9 million.
A combination of still-ongoing COVID-19 restrictions in Asia, the company’s biggest market, along with inflation and other economic challenges, hurt sales momentum and new customer acquisitions, said CEO Kevin Guest.
“As we look ahead, we anticipate continued COVID-related inflationary and economic challenges in many of our markets,” Guest told analysts during an earnings call.
Despite the current headwinds, Guest said USANA “remains a very healthy business” and plans to put in place new measures to counter the sales slow down.
Some of those short-term measures, Guest said, will include new and modified incentives in different global markets and regions, accelerating the return to in-person meetings and events where possible, and an increase in “targeted and relevant communications between our management team and associate leaders.”
“We have the means, ability and determination to put USANA back on a growth trajectory towards the full monty,” he said. “Though we are committed to addressing the short-term challenges we are currently facing, the long-term health and growth of USANA remains our primary focus.”
USANA has now forecast sales for 2022 to be in the range of $955 million to $975 million.
- Total Sales: $233 million, down 15%
- Total Profit: $14.9 million, down 48% (down from 27.3%)
- Asia Pacific Sales: $183 million, down 17%
- China Sales: $110 million, down 11%
- Americas and Europe Sales : $51 million, down 5%
Economic uncertainty driving stock market volatility continues to hurt a key segment of Primerica, a Georgia-based financial services firm’s business, contributing to a decline in sales during the third quarter.
Primerica is a direct seller of term insurance policies and annuities, along with other financial and investment services.
The company reported sales of $676 million during the quarter, a 2% decrease compared to the same period last year.
Its core business—selling term life insurance plans—remains Primerica’s biggest money-maker, though sales have slowed since reaching pandemic-era records. For the quarter, Primerica reported issuing 71,000 term life policies in the quarter, a decline of 6% from a year ago.
While sales were down, the segment increased revenue by 7% during the quarter to roughly $428 million.
CEO Glen Williams told analysts during an earnings call that continued growth in the company’s term life segment helped offset the negative impact of the up-and-down stock market during the three-month period ended in September.
A lucrative part of Primerica’s business—its Investment and Savings Product—reported sales of $2.2 billion, down 23% compared to the prior year period. That sales downtrend is expected to continue, as the company projected fourth-quarter revenue could decline as much as 30% year over year due to continued economic uncertainty.
Along with lower sales, the investment and savings segment experienced a “substantial decline” in client asset values during the quarter, Williams said, and total revenue decreased by 14% to $201.6 million.
“Prolonged equity market volatility continues to erode investor confidence and pressure ISP results,” he said.
But Williams added that even with sales in the company’s investment and saving segment down this year compared to record setting figures from 2021, “it’s worth noting that we expect 2022 to be our second best year for sales.”
- Total Sales: $676 million, down 2%
- Total Profit: $51.8 million, down 54%
Senior Health Segment Update
During the call with analysts, Primerica also provided an update on its senior health business. The company acquired TeleQuote, a provider of senior health insurance and distributor of Medicare-related insurance policies, in July of 2021, but the segment has underperformed consistently since the acquisition.
Primerica executives sounded an optimistic tone about the segment but conceded they are still learning how to manage a senior healthcare business.
The company is planning to grow the business slowly, and fourth-quarter operating earnings for the segment are expected to be about breakeven due to the Medicare annual enrollment period being underway.
But Williams noted during the call that the senior health business is currently going through a process of right-sizing—a combo of natural attrition and then not replacing certain sales agents.
The result, Williams said, is that Primerica’s senior health segment now has half the number of sales agents now as it did last year. Primerica, he added, is trying to match “staffing levels to sales targets.” So far, the reductions have led to improved agent tenure and efficiency.
Asked if the sales agent reductions would lead to future top-line sales growth, Williams offered an honest assessment: That’s not likely in the near future.
“I do think we’re going to feel much better about the quality of what we sell this year than we did last year,” he said. “And then once we feel like we get the quality and profitability where we have some confidence in it, then we can take a look at how fast we’re going to grow the business after that.”
Williams also used the earnings call to tout the growth in Primerica’s salesforce.
The company has now seen a jump in life-term insurance license reps over the past four consecutive quarters. During the most recent quarter, the salesforce grew by 3% year over year.
And since the start of 2022, Primerica said its salesforce has grown by a total of 4% to 134,313. That’s the result of the company leveraging improvements in the licensing process, along with excitement generated at the company’s biennial convention.
Williams said the company now appears to be on track to surpass recruiting goals for the year.
“We remain laser-focused on growing the salesforce, and our efforts are showing solid progress,” he said.
Nu Skin, a Utah-based seller of skin care and nutritional products, reported a loss of $25.4 million during the third quarter and said it expects global economic pressures negatively affecting sales to continue.
Nu Skin also reported revenue of nearly $538 million for the quarter, down 16% year over year, and lowered its guidance for 2022, saying macro headwinds are expected to persist over the near to mid term.
“The third quarter proved more challenging than anticipated due to an increasingly difficult global environment and geopolitical complexities,” CEO Ryan Napierski told analysts during a recent earnings call.
The third-quarter results are a stark contrast to the same period a year ago, when Nu Skin reported profit of $49.7 million on total revenue of $641 million.
But Nu Skin executives told analysts a variety of factors have made the business environment more challenging this year: continued disruptions from COVID-19 in Asia, global inflationary pressures, conflict in Europe, and the strengthening of the U.S. dollar above expectations.
In China, the company’s third-largest market, sales declined by 44% to $75 million, the product of prolonged COVID-19 restrictions, including continued lockdowns Napierski said. In South Korea, where sales fell 27%, economic pressures combined with Nu Skin price increase hurt revenue. And in Europe, Middle East and Africa, “the distraction caused by conflict in the region as well as inflation and energy concerns” contributed to a 19% revenue decline, Napierski said.
The Southeast Asia region grew revenue by 6% to $83.5 million during the quarter. Napierski credited the jump in sales to Nu Skin holding its first live expo in three years in the region, a gathering that “energized our sales leaders and built some momentum” for new product launches.
In the Americas—which includes markets in North America and Latin America—revenue was flat, but grew by 3% on a constant currency basis.
The U.S. has become Nu Skin’s largest market, but the company warned it is “seeing some growing economic headwinds” domestically, in particular inflationary pressure.
“I think our guidance reflects the growing consumer sentiment that the market is getting tough,” he said.
Nu Skin is forecasting revenue in the range of $500 million to $550 million for the fourth quarter. Full-year revenue is now projected to range from $2.2 billion to $2.25 billion, which is down from the range of $2.33 billion to $2.41 billion the company forecast following the second quarter of this year.
- Total Sales: $537.8 million, down 16%
- Total Profit: $25.3 million loss
- Americas/Pacific Sales: $131.5 million, flat
- Europe and Middle East Sales: $45 million, down 19%
- China Sales: $75 million, down 44%
Nature’s Sunshine saw a drop in sales during the third quarter, as the company endured “unprecedented external headwinds.”
CEO Terrence Moorehead told analysts during a recent earnings call that Nature’s Sunshine faced continued global economic challenges from inflationary pressures and volatile foreign exchange rates during the three-month period that ended in September.
Sales during the third quarter totaled $104.5 million, down 9% year over year.
Adjusted on a constant currency basis, total sales for the quarter were down 2% compared to the same period a year ago, a figure that Moorehead said reflects the strength of the company, “especially given the current environment, where it has become more difficult to drive customer engagement.”
But he said that cost increases from inflation and currency translations, along with COVID-19 disruptions in Asia, have led to a profit decline.
Despite the challenging environment, Moorehead said Nature’s Sunshine business remains healthy.
“I want to reiterate our steadfast commitment to successfully navigating this unique period of market volatility and uncertainty,” he said. “We have a strong balance sheet, customer orders are still largely holding, and when we adjust for currency performance it is still near historical highs.”
Moving forward, challenges presented by inflation and foreign currency volatility are expected to continue, and the company is projecting continued pressures on margins.
During the earnings call, Nature’s Sunshine executives forecast top-line sales for the full year to “reflect a low-to-mid single-digit decline versus 2021.” Regionally, Nature’s Sunshine is projecting European sales to decline overall for 2022 by 15% to 25% compared to the year prior, and for “continued declines in North America,” given the current inflationary environment.
The one bright spot is the Asia market. Nature’s Sunshine had forecast sales to increase in mid-single digits this year, due to growth in Japan, Korea and Taiwan—but this has been offset by continuing declines in China due to ongoing COVID-19 restrictions.
To counter the current economic landscape, Moorehead announced that Nature’s Sunshine is introducing a new plan to deliver savings between $10 million to $12 million. That plan includes optimizing materials used in supplements, improving efficiencies in the company’s manufacturing process, and upgrading logistics and transportation.
The savings from that plan are expected to be realized over the next 18 months, Moorehead said.
“It’s a pretty striking plan. We have been working on this for the last several months,” he said. “These are meaningful savings, … and they are sustainable as well, so we feel really good about them.”
- Total Profit: $2.5 million, down 30%
- Total Sales: $104.5 million, down 9%
- Asia Sales: $47.8 million, flat
- Europe Sales: $19.3 million, down 11%
- North America Sales: $31.5 million, down 16%
- Latin America and Other Sales: $5.7 million, down 14%