Unlike its competitor Herbalife, which achieved record volumes in the second quarter of 2020, Nature’s Sunshine saw flat or declining sales which were offset to some extent by aggressive cost cutting. In the second quarter of 2020, the company recorded net sales of $ 87.3 million, up from $ 90.7 million in the same period a year earlier. In local currency (the US dollar strengthened over the period), sales declined by around 2%.
Nature’s Sunshine is a network marketing company based in Lehi, UT. The company sells a line of dietary supplements and functional food products under the Nature’s Sunshine Products and Synergy Worldwide brands.
Stable or declining sales in most markets
In gross dollars, sales fell most sharply in Asia. Results there fell from $ 35.2 million in the second quarter of 2019 to $ 32.8 million in the second quarter of 2020. Sales in North America were flat, reaching $ 34.5 million for the first. quarter of 2020, up from $ 34.6 million in the same period a year earlier. The only bright spot was Eastern Europe, where sales were generally up, driven by an increase in Russia.
Performance was also poor in Latin America, where sales fell from $ 5.9 million in 2019 to $ 4.6 million in the second quarter of 2020. This represents a 16% decline in local currency. The company attributed this to the substantial shutdowns of many markets due to pandemic concerns.
Nature’s Sunshine was not well positioned to deal with virus shutdowns in its operations in Latin America, as it still relied primarily on face-to-face interactions to generate orders. CEO Terrence Moorehead said the new initiatives in place will start to turn the fortunes of the company in the region once economic life returns to normal.
âGoing forward, we expect performance improvement in LATAM through a revitalized new product development program and the introduction of online ordering capabilities across the region. Again, once the market restrictions are lifted, we believe these changes will start to have a positive impact on the business â,he said.
Pressure to exit LATAM markets
But the only stock analyst on the earnings call, Steven Martin of London-based Slater Investments, said investors’ patience was starting to run out in the face of the company’s struggles in Latin America. Nature’s Sunshine sales have been eroding in the region for several quarters now. In the second quarter of 2019, net sales were $ 6 million; in 2017, they amounted to $ 6.2 million; in 2016 they were $ 7.3 million and in 2015 they were $ 8.2 million. From countries whose economies have collapsed, like that of Venezuela, to others who have had recent high profile international payment defaultsLike Argentina, the economic outlook for the South American continent has darkened.
âIf you can’t get LATAM up and running or run better quickly, it’s time to cut your losses. There are too many countries out there that are too screwed up â, said Slater.
Stock traders appear to be expecting a equivocal earnings report from Nature’s Sunshine, which, on the bright side, is said to have managed debt well and has a large cash reserve. Even with disappointing sales returns, the company increased its adjusted net income to 28 cents per share, from 15 cents in the same period a year earlier. The company’s shares are trading at around $ 11.12 a share today, which is actually a 52-week high. The company’s 5-year high is $ 16 per share.