Nature’s Sunshine, which will celebrate its 50th anniversary next year, is a network marketing company based in Lehi, UT. The company markets a wide variety of dietary supplements and personal care products. In its most recent earnings conference call with stock analysts, CEO Terrence Moorehead said despite careful planning for the supply chain issues foreseen with the pandemic, the company has still been getting squeezed lately.
“Since the start of the pandemic, our business has been relatively unaffected by what COVID-19 has done to the supply chains of so many other businesses around the world. We took aggressive actions at the beginning of the pandemic to increase inventory, and that has served us well,” Moorehead said.
Supply chain issues take bite out of margins
“However, towards the end of the first quarter, we started to see more intense pressure on ingredient and packaging availability, as well as an end-to-end tightening across all aspects of our logistics pipeline, causing product delays and driving up costs in several areas. As a result, we've experienced an increase in product shortages and saw Q1 gross margins decreased by 60 basis points as we intensified our efforts to meet growing demand by investing more heavily to compensate for gaps in the supply chain,” he added.
Moorehead, who was named CEO at Nature’s Sunshine in 2018, made his comments as part of an earnings call with stock analysts that was posted in transcript form on the site seekingalpha.com. Moorehead was brought on to revamp operations at the legacy company after it had stumbled both with a botched software implementation and a protracted and difficult entry in the Chinese market.
Ingredient suppliers and a manufacturer told NutraIngredients-USA recently that the supply dislocations brought on by the pandemic are far from over. Issues such as an inconsistent supply of shipping containers right through to a scarcity of packaging material continue to reverberate through the supply chain, much as the pulse of a stoppage will ripple back through a line of cars during stop and go rush hour traffic.
Moorhead said the supply chain challenges had bitten into margins for the company’s first quarter of fiscal 2021, but probably by 1% or less. Sales for the quarter came in a $102.4 million, a 7% year-over-year rise. The strongest growth was recorded in China and Japan, where sales grew 38% and 44% respectively.