Usana Health Sciences has achieved another quarter of record financial results based largely on strong sales within China. In an earnings call with analysts discussing the company’s second quarter 2013 financial results, Paul A. Jones, Usana’s CFO, said that sales in China had risen 36.3% in the quarter, helping the company to a record $189.1 million in retail sales. Other strong areas of growth in the region included South Korea, where sales rose 19%, Jones said.
“Sales increased 17.5% and earnings per share increased nearly 55%. We believe this growth reflects the continued successful execution of our strategic initiatives. After generating another record quarter, we are on track to report our 11th straight year of record results in 2013,” said David A. Wentz, Usana’s CEO.
Restricted product list
Direct selling operations are strictly regulated in China. Usana holds a direct selling license in the Beijing region, and was granted licenses in three additional provinces within China in the first quarter, helping to drive sales there in the second quarter, Jones said. In addition, sales momentum across the region was boosted by a sales conference held in the region during the first quarter, Jones said. Sales in mainland China were about $3.5 million better than expected, and Jones attributed much of this than faster than expected growth in distributor networks there.
In addition to strict regimentation of direct sales activities, China also requires an exhaustive registration process for health products sold within the country. As a result, Usana’s product list in mainland China at the moment consists only of 8 USANA-branded products, 6 Sensé-branded products and 10 BabyCare-branded products. This is not as much of a handicap for Usana as it might be for some of its direct selling competitors, as the company has a fairly restricted product range to begin with.
A confounding factor on these results came from policies instituted within the company to try to prevent sales associates from purchasing products in neighboring countries where they might be cheaper due to lower pricing or currency fluctuations. This applies mostly to associates in Hong Kong purchasing products within mainland China, but could apply elsewhere Wentz said.
“We saw the greatest impact in Asia as we saw (associates) stock up before the change of the policy,” Wentz said.
Another positive mentioned in the conference call was the opening of the market in Colombia, Usana’s 19th overall market. The market has only been active for about 10 days, Wentz said, but early returns are strongly positive.
“It is going to be a great market for us. Very smooth opening, without any glitches that I know of. It's one of the best openings we've ever had, so we're very excited,” Wentz said.