CEOs confident that improvements of key metrics will reverse the losses of 2022
By: Dave Rauf
Herbalife boosted profits by 42% in the fourth quarter, as the company’s key business metrics stabilized and it leveraged a significant reduction in expenses during the final three months of 2022.
The direct selling giant beat analyst expectations for the quarter, and its new CEO, the returning Michael Johnson, said a plan has been put in place to return to growth in the “near term.”
The seller of supplements and weight-loss products reported total fourth-quarter sales were down 10.4% to $1.2 billion. That includes a 9% slide in North America sales.
However, the company’s cost of sales fell 10% to $265.6 million, and selling, general, and administrative expenses dropped by nearly 15% during the quarter. Both savings helped bolster net income for the three-month period.
For the full year, profit was down 28% to $321 million.
Herbalife officials had warned that profit for the year would be lower than 2021, which saw the company set a full-year record for sales.
“There’s no way to get around that we are disappointed in our performance for fiscal 2022 and our last quarter,” Johnson told analysts during an earnings call.
“Here’s my promise. Our sales will grow, and our results will improve,” he added.
Herbalife named Johnson, who was previously CEO until 2020, as the chairman and chief executive following the sudden departure of John Agwunobi in late October 2022. Johnson has now served in the unusual combo role of Agwunobi’s predecessor and successor.
Part of the plan to get back to growth, Johnson said, includes Herbalife focusing on content innovation and growing its product portfolio, transforming from a supplement seller to a “health and wellness company.” That means “new products, new services, coaching, and wellness evaluations available through our distributor platform for our customers,” he said.
Herbalife said it also can not provide guidance for 2023 at this time, “given the rapidly shifting macroeconomic sentiment and backdrop, as well as increased volatility in the market.”
The company added that trends showing key business metrics were stabilizing during the third and fourth quarters of last year are expected to continue into the first quarter of 2023, but said not to expect a return to growth during the first quarter of 2023.
“What we’re suggesting,” said Chief Financial Officer Alex Amezquita, “is that the first quarter probably has seeds planted for that return to growth.”
- 2022 Total Profit: $321.3 million, down 28%
- 2022 Total Sales: $5.2 billion, down 10%
- 4Q Profit: $54.4 million, up 42%
- 4Q Sales: $1.2 billion, down 10%
- 2022 North America: $1.2 billion, down 12%
- 4Q North America: $275 million, down 9%
- 2022 Europe and the Middle East: $1.1 billion, down 19%
- 4Q Europe and the Middle East: $246.8 million, down 15%
- 2022 South and Central America: $786 million, down 4%
- 4Q South and Central America: $191 million, up 3%
- 2022 Asia Pacific: $1.7 billion, up 6%
- 4Q Asia Pacific: $397 million, flat
- 2022 China: $391 million, down 38%
- 4Q China: $71 million, down 45%
In-Person Events Set To Play Key Role in 2023
During the call with analysts, Johnson also highlighted the company’s push to host more in-person events, a strategy that company officials expect to yield more sales.
So far in 2023, Herbalife has hosted 170 distributor events around the world, allowing the company to reach 175 distributors with new training and face-to-face engagement.
Johnson said he expected “energy and engagement being generated at our in-person events will translate into improving metrics in 2023.”
New Vision From New CEO
Johnson also touched on his plans to steer Herbalife back to growth after a challenging 2022. The focus, he said, will be on products and content, along with a $400 million digital transformation that’s currently ongoing.
But he added that the company has to “get more in tune with the times” as it shifts from a “weight-loss company” to becoming a “high-performance nutrition company.”
“We’re going to even take it further and deeper and wider with our verticals,” Johnson said, “and we’ll use our digital platform to enhance all that.”
USANA Health Sciences reported profit of $12.8 million in the fourth quarter, as sales and revenue dipped in the final three months of the year amid the continually evolving COVID-19 landscape in parts of Asia.
Overall, the company said it made $69.4 million profit in 2022 on sales of $999 million, both double-digit declines compared to a year ago.
CEO Kevin Guest said last year presented a challenging environment for not just USANA, but the direct selling industry as a whole.
“We remained focused on executing our long-term growth strategy,” Guest told analysts during a recent earnings call.
Several key Asia markets were negatively impacted during the fourth quarter by restrictions related to COVID-19, Guest said. That includes parts of Southeast Asia such as the Philippines and Malaysia, in particular.
But in China, the government’s decision to lift its Zero COVID policy late in 2022 helped drive an increase in sales and customer activity for USANA in its single biggest market, said Guest.
“While we are encouraged by this increase in demand, it is still too early to forecast
long-term consumer demand in this critical market, particularly given the seasonality we experienced during the Chinese New Year holiday, which recently ended,” Guest said.
“We anticipate that we will begin to see a more normalized operating environment in China during 2023 and remain confident in our long-term growth opportunity in this key market.”
Even as sales and profit dropped compared to 2021, Guest said USANA made progress in several areas that position the company for “future growth,” including making advances in digital commerce initiatives, new market expansion, finalizing two acquisitions, and the launch of an affiliate program in select markets.
“Notwithstanding the challenges we have seen in China and many of our other markets,” Guest said, “USANA ’s business has remained financially and operationally strong and is strategically positioned for future growth.”
USANA said it expects full-year sales in the range of $850 million to $950 million.
- 2022 Total Sales: $999 million, down 16%
- 2022 Total Profit: $69.4 million, down 40%
- 4Q Sales: $228 million, down 15%
- 4Q Profit: $12.8 million, down 37%
- 4Q Asia Pacific sales: $183 million, down 6%
- 4Q China sales: $118 million, down 10%
- 4Q Americas and Europe sales: $45 million, down 11%
2023 Market Expansion
During the call with analysts, USANA President Jim Brown briefly touched on the company’s plans to enter a new international market later this year. Without naming the market, Brown said USANA is currently looking at the fourth quarter of 2023 to launch, noting that the company has been preparing for that over the past year and half.
“When we do this, you have to go in and register, and find the right people to run the market. We have been very successful, excited about the talent that we brought on for that market,” he said. “So … it won’t have a huge impact on this year, so we will look at a bigger impact in ‘24, but that creates excitement through the field.”
Nu Skin beat Wall Street estimates for the fourth quarter, netting a profit of $57 million after reporting a loss in the same period a year earlier.
For the quarter, the Utah-based seller of skin care and nutritional products posted sales of $522 million, a year-over-year decrease of 22%, as revenue tumbled in most global regions. The exceptions: the U.S., where sales increased by 4%, and Japan and Hong Kong, where revenue was up 2% on a constant-currency basis.
A variety of macroeconomic factors—including COVID-19, foreign exchange rates, inflation and supply chain issues—affected the company globally throughout 2022, said CEO Ryan Napierski. And while the macro-environment remains uncertain, Nu Skin is expecting it to “improve throughout the year.”
“We remain well positioned to capitalize on enormous landscape shifts that are transforming the beauty and wellness industries around personalization, social commerce and the gig economy,” Napierski told analysts during a recent earnings call.
The company reported 2022 full-year profit of $104.8 million on $2.07 billion sales, both double-digit declines from a year earlier.
The biggest year-over-year decline in Nu Skin’s business stemmed from strict COVID measures in China, with the company estimating a $208 million revenue shortfall stemming from disappointing sales in that country, Napierski said.
While China has lifted COVID restrictions, opening up in recent weeks, there has also been a surge of infections, according to Nu Skin. The company expected conditions in its second largest market to remain difficult throughout at least the first half of 2023, and it is estimating sales in the country will be down this year by anywhere from 23% to 35%.
Aside from China, Nu Skin executives told analysts they see opportunities for growth in each of their segments in 2023.
The company said it expects revenue in the range of $450 million to $490 million for the fiscal first quarter.
- 2022 Total Profit: $104.8 million, down 29%
- 2022 Total Sales: $2.07 billion, down 18%
- 4Q Sales: $522 million, down 22%
- 4Q Profit: 57.2 million
- 2022 Americas/Pacific Sales: $508.5 million, down 7%
- 2022 Europe and Middle East Sales: $204.2 million, down 28%
- 2022 China Sales: $303.6 million, down 37%
- 4Q Americas Sales: $129 million, down 10%
- 4Q Europe and Middle East Sales: $55.3 million, down 19%
- 4Q China Sales: $74 million, down 43%
Smart Beauty Devices to Receive ‘Big Push’ in 2023
Nu Skin launched its first IoT-connected beauty device last year, and the company has big ambitions for the line of products moving forward.
The smart device segment is a key part of Nu Skin’s product personalization strategy, offering customized treatment options, intelligent coaching and skincare routine tracking. The devices are intended to be coupled with the company’s consumer-facing app that offers product personalization, providing Nu Skin with valuable customer data about product usage.
As Napierski summed it up in the call with analysts: “We will now be able to capture additional insights like usage patterns and habits to integrate with the customers’ state of skincare needs and goals, and we’ll get all of that data in real time.”
During that call, Nu Skin Chief Financial Officer Mark Lawrence said smart beauty devices are “our big push this next year.”
Nu Skin plans to grow sales of its line of IoT-connected beauty products —dubbed “iO devices”—to about 15% of the company’s total revenue in 2023. The goal is for those smart beauty devices to make up 30% of the company’s overall sales by 2025.
But Napierski noted there’s still a long way to go, as the company’s first smart device launched just months ago in the fourth quarter of 2022. It accounted for less than 5% of total revenue last year.
“The importance of iO devices,” he said, “are the systems that are attached to that and the integration of those systems across our broader portfolio.”
Riding robust sales from a new liquid collagen product, LifeVantage reported second-quarter revenue of $53.7 million, up 3% compared to the same time a year ago.
The sales increase during the most recent three-month period marked the company’s first year-over-year revenue jump in 10 quarters, said President and CEO Steve Fife. On a constant-currency basis, revenue increased by 7.4%.
“We are very pleased with our latest results, including a return to top line growth in the second quarter, but recognize it is still early in our transformation journey,” Fife told analysts during a recent earnings call.
The Utah-based supplements and skincare products company reported a second-quarter loss of $1.1 million, after it had reported a profit in the same period a year earlier.
Halfway through fiscal 2023, revenue totaled $105.4 million, which is flat compared to the same period a year ago.
A key driver in LifeVantage’s revenue increase during the second quarter was the U.S. market. Revenue generated by domestic market sales increased by 15.4%, and Fife said the company is “encouraged by recent trends in several other key markets.”
LifeVantage’s liquid collagen—launched last June—largely propelled those U.S sales increases, and Fife said the product “remains a top performer and contributor to the U.S. revenue gains.”
During the call with analysts, Fife highlighted LifeVantage’s plans to continue expanding marketplaces for its liquid collagen product. That includes launching in Japan, Australia and New Zealand in March.
Additionally, he said the company has fixed supply chain issues for its liquid collagen product, after orders exceeded projected demand in its first full quarter of sales last year, which had created a “significant backlog.”
“The breadth of the demand for our unique collagen product bodes well for future quarters as well as our overall product strategy,” he said.
For 2023, LifeVantage has already launched three new products, and starting March 1, the company is planning to introduce a revamped e-commerce platform. The company also announced a strategic transformation, dubbed “LV360,” earlier this year that Fife described in the earnings call as “designed to forge a new, more modern chapter in our company.”
Lifevantage expects full-year revenue in the range of $202 million to $212 million for 2023.
- 2Q Profit: Loss of $1.1. million
- 2Q Sales: $53.7 million, up 3%
- 2Q Americas Sales: $39.7 million, up 14%
- 2Q Asia/Pacific and Europe Sales: $13.9 million, down 20%
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