One of Tuesday’s biggest losers is a health and beauty direct-selling company that’s been struggling to make sales overseas.
Most direct-selling companies, whether private such as Amway or publicly traded like Herbalife, have been shifted over to selling in international markets, whether that be South or Latin America or in Asian markets like China.
Setbacks in these areas, however, tend to have a massive impact on the company’s themselves and their stock prices. That’s exactly what happened to Nu Skin (NYSE: NUS), whose shares have fallen 18 percent in after-hours trading after the company reported poor sales in China.
Nu Skin had forecasted earnings of around 83 cents per share on revenue of $623 million in the second quarter. In comparison, most analysts had expected something closer to 93 cents per share on a Q2 revenue figure of $672.5 million.
Specifically, the company is facing increased scrutiny from the Chinese government, which has begun to look more closely on the impact of various direct selling organizations as well as the quality of their products.
“We are adjusting our guidance for the year primarily due to a reduced revenue outlook in Mainland China following the government’s 100-day campaign to review and inspect the health products and direct selling industries,” said Ritch Wood, chief executive officer. “Continued restrictions on sales meetings, as well as media scrutiny, have negatively impacted consumer sentiment and contributed to this adjustment. While we anticipated we could begin holding meetings in the second quarter, meeting approvals for the industry have been significantly more restrictive than expected and remain limited. Additionally, the U.S. dollar has continued to strengthen, and we have adjusted our 2019 guidance to include a larger-than-anticipated foreign currency impact. We will provide more detail regarding results for the second quarter in our earnings release scheduled for Aug. 6.”
Shares of Nu Skin fell by 17.9 percent in after-hours trading, following a modest 3.4 rise prior to the news release. Over the past few months, the company’s stock has been falling erratically, declining from the mid-60s to its current price at $45.51, punctuated with a number of intraday price spikes.
While the stock might be a good speculative opportunity for traders looking for something volatile, it’s not a good recommendation for investors looking for something long term.
Other major direct-selling companies such as Herbalife (NYSE: HLF) have also tumbled in after-hours trading, declining by 6.7 percent and reaching a new 52-week low in the process. This was also due to the Chinese government’s 100-day review on the direct-selling health products industry, which seems to have hit most direct sales companies pretty hard.
Nu Skin Company Profile
Nu Skin Enterprises Inc is a health and beauty direct-selling company with a comprehensive product line: anti-aging skin products; peels, masks, and scrubs; moisturizers; body care; hair care; men’s care; oral care; sun protection; and cosmetics.
The company has three main product divisions: anti-aging, skin, and pharmaceuticals. The pharmaceuticals division offers nutritionals, weight-management products, and food supplements. The company has operations internationally, in more than 50 countries across the Americas, Europe, and the Asia-Pacific. – Warrior Trading News