Nature’s Sunshine shows falling sales globally, gets pressure to exit LATAM markets

Unlike competitor Herbalife, which notched record volumes in its second quarter of 2020, Nature’s Sunshine reported flat or falling sales which were offset to some degree by aggressive cost cutting.  In its second quarter of 2020 the company recorded net sales of $87.3 million, down from $90.7 million in the same period a year previously.  On a local currency basis (the US dollar strengthened in the period) sales were down about 2%.

Nature’s Sunshine is a network marketing company based in Lehi, UT.  The company sells a range of dietary supplements and functional food products under the Nature’s Sunshine Products and Synergy Worldwide brand names. 

Flat or falling sales in most markets

In raw dollar figures sales were down most sharply in Asia.  Results there went from $35.2 million in the second quarter of 2019 to $32.8 in the second quarter of 2020.  Sales in North American was flat, coming in at $34.5  for the first quarter of 2020 compared to $34.6 million in the same period a year previously.  The lone bright spot was Eastern Europe, where sales were up overall, driven by an increase in Russia.

Performance was also poor in Latin America, where sales went from $5.9 million in 2019 to $4.6 million in the second quarter of 2020.  That represented a 16% decline in local currency. The company attributed this to the substantial shutdown of many markets because of pandemic concerns.

Nature’s Sunshine was not well positioned to deal with the virus shutdowns in its Latin America operations because it was still relying primarily on face to face interactions to generate orders.  CEO Terrence Moorehead said new initiatives in place will start to turn the company’s fortunes in the region around once economic life returns to normal.

“Moving forward, we would expect to see improved performance in LATAM due to a revitalized new product development program and the introduction of online ordering capabilities across the region. Again, once the market restrictions are lifted, we believe these changes will start to have a positive impact on the business,”​ he said.

Pressure to exit LATAM markets

But the lone stock analyst participating in the earnings call,  Steven Martin of London-based Slater Investments, said patience among investors was starting to wear thin on the company’s struggles in Latin America.  Nature’s Sunshine’s sales have been eroding in the region for a number of quarters now.  In the second quarter of 2019 net sales came in at $6 million; in 2017 they were $6.2 million; in 2016 they were $7.3 million and in 2015 they were $8.2 million. From countries whose economies have collapsed, like Venezuela’s, to others that have had recent high profile international debt defaults​​, such as Argentina, economic prospects for the South American continent have dimmed.

“If you can't get LATAM up and running or functioning better soon, time to cut your losses. There are too many countries there that are too screwed up,” ​Slater said.

Stock traders seem to have been expecting an equivocal earnings report from Nature’s Sunshine, which on the plus side reportedly has managed its debt position well and is showing a hefty cash reserve.  Even with the disappointing sales returns, the company increased its adjusted net income to 28 cents per share, up from 15 cents in the same period a year perviously. The company’s stock is trading at about $11.12 a share today, which actually represents a 52-week high. The company’s 5-year high is $16 a share.