Nature's Sunshine looks forward to China sales to boost sagging bottom line
The company reported that fourth quarter fiscal 2017 earnings were $88.3 million, up 5.2% for the same period a year previously. While the company lost money (more about that in a minute), the results were a welcome respite from the flat to declining sales of recent quarters.
Nature’s Sunshine, which recently celebrated its 45th anniversary, is one of the oldest network marketing companies in the industry that focuses on nutritional products. The company was ranked as the world’s 50th largest MLM (multi-level marketing organization) on the annual list put out by Direct Selling News. That was down from No. 44 on the 2015 version of the list.
Nature’s Sunshine, which sells a variety of dietary supplements, functional foods and personal care items under the Nature’s Sunshine and Synergy Worldwide brand names, sells in markets around the world.
But it was a late entrant to the Chinese market, which has placed special regulatory requirements on MLMs. It took the company several years to finally be approved for a direct selling license, a period in which investments made to enter that market could show no return.
Taking a hit from new tax law
While the company released its final earnings report, it said the net loss it will report is still in estimate form. This is because the impact of the new tax law signed by President Trump has yet to be fully quantified. Like many other companies that bring in a significant amount of their revenue overseas, Nature’s Sunshine will take a hit.
“The fourth quarter net loss attributable to common shareholders is expected to range between $17.0 and $18.0 million, or $0.90 to $0.95 per common share. The net loss is preliminary and subject to final determination of the provision for income taxes, including an estimated $14.0 to $15.0 million, or $0.74 to $0.79 per common share, non-cash re-measurement of deferred tax assets and liabilities related to US tax reform,” the company said in a press release.
The software implementation, which was rolled out starting in April in North America, hurt sales in that region. The troubled process resulted in long wait times at the company’s call center which hurt customer retention.
“We believe the disruptions to our North America business as a result of a new ERP system deployed in April 2017 are now behind us, but we have additional work to do to re-energize the market. We posted growth in China and continue to emphasize expanding our direct selling efforts in this market with the goal of building a long-term profitable new market,” said CEO Greg Probert.
Full year details
For the full year, the company said it posted net sales of $342.0 million, an increase of 0.3% over the year previously. On a local currency basis, net sales decreased 0.2% as compared to 2016. NSP China net sales increased approximately 91.4% compared to the same period in 2016. NSP Russia, Central and Eastern Europe net sales increased approximately 7.3% compared to the same period in 2016. NSP Americas net sales decreased approximately 5.6% compared to the same period in 2016. Synergy WorldWide net sales decreased approximately 0.8% compared to the same period in 2016 (or 1.7 percent in local currencies).
While sales in China are ramping up quickly (more than 200% in the fourth quarter), this comes from a relatively small base. Net sales in China were about $20 million for fiscal 2017, and the company lost $0.18 a share on these operations.
