Usana notches sales gain despite pandemic disruptions

23-Jul-2020 - Last updated on 23-Jul-2020 at 15:20 GMT

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Network marketing company Usana turned in solid results in its second quarter despite the interruption of face-to-face selling and recruitment that is the core of the MLM model.

Usana, which is based in Salt Lake City, is one of the world’s biggest multilevel marketing companies (MLMs) devoted solely to the sales of nutritional products, including dietary supplements, meal replacements and functional foods. According to the industry publication Direct Selling News Usana is the world’s 16th largest MLM overall.

Immunity craze buoys sales

In an earnings call with stock analysts yesterday, Usana CFO Doug Hekking said the company’s results had been buoyed earlier in the year by a strong demand for immunity-related products. As many in the industry have suspected, that demand has proven to have legs.

“We've seen the products that are designed to provide immunity support, continue to go back and perform strong, not near what they kind of initial reaction was, but still at a higher level than historical levels,” Hekking said.

CEO Kevin Guest said things are returning somewhat to normal in mainland China, the company’s largest market. Large gatherings are still out, but the company’s offices in the country have reopened. But he said the ongoing results of the pandemic, as well as the lingering effects of the Chinese government’s ‘100 day review’ of the entire network marketing sector, means the company will have to develop a new model for business in the future.

Finding a new way of working

Big, high energy meetings are one of the ways Usana and other MLMs keep its distributor bases whipped up. The recent convention in Asia was done virtually, and Guest said the upcoming global annual convention in Salt Lake City will be, too. Guest said getting these virtual events right means they can come close to being as effective as the in-person versions.

“It will be a virtual convention, we still will have product launches, we'll still have specials, we'll still have entertainment performers, we'll still have our recognition segments and we'll have participants who will log on, we're setting it up where we'll have some VIP type participation, there will be special training sessions and then we will have just open to the general public, who will have access and so it will be very similar from a content perspective as to what we have the presentations from executive management and several leaders and we're bringing in some trainers to work and -- but it will be all virtual. And as we saw in our Asia-Pacific Convention, the numbers who actually will attend virtually is far greater than the people who would have attended in person,” he said.

Earnings details

For the quarter Usana recorded $259 million in top line revenue, compared to $256 million for the same period a year previously. Analysts had projected that the company would bring in about $8 million more than it did. $209 million of that revenue came from Asia, with $124 million recorded within China itself. But the company did beat projections on profits, bringing in $1.32 in earnings per diluted share, about 13 cents more than had been expected.

The company also raised its earnings outlook slightly for the rest of 2020. Usana now expects to bring in $1.05 to $1.10 billion for the whole of 2020. The previous forecast range was $1 billion to $1.08 billion.

Stock traders were disappointed by the revenue miss, sending the stock down from $92 a share before the earnings release on late Tuesday to $85.39 today. The company’s all time high was almost $132 a share in late August 2018.