Nu Skin Enterprises, Inc. (NUS) has been experiencing a challenging period, with its stock price declining by 27.7% in the past three months. This downturn reflects a broader trend within the industry, with the beauty and wellness sector experiencing a 21.3% decline. Additionally, Nu Skin’s performance has lagged behind the Zacks Consumer Staples sector and the S&P 500, which have shown respective growth of 1.2% and 4.2%.
Despite its position as a prominent player in the beauty and wellness industry, Nu Skin has struggled to navigate a series of macroeconomic headwinds that have dampened consumer spending, particularly for premium products. These economic challenges have been compounded by stronger-than-expected foreign currency fluctuations and ongoing pressures within the direct selling industry. These factors have culminated in a disappointing second-quarter 2024 performance for the company.
The company’s first-half 2024 performance, combined with rising foreign exchange headwinds, has prompted management to tighten the annual guidance range for 2024. This adjustment highlights the ongoing challenges facing Nu Skin and its prospects for the remainder of the year.
Nu Skin’s second-quarter performance was negatively impacted by persistent macroeconomic obstacles, which continued to weigh on consumer spending and customer acquisition, particularly for premium products. These headwinds, coupled with foreign adverse currency fluctuations, resulted in a 12.2% year-over-year decline in Nu Skin’s quarterly revenues, reaching $439.1 million. On a constant-currency basis, revenues fell by 8%. This decline was accompanied by a 16% year-over-year drop in sales leaders to 38,592, a 14% decrease in the customer base to 893,514, and a 17% reduction in paid affiliates to 155,486. On an adjusted basis, paid affiliates experienced a 9% decline.
Nu Skin’s significant international presence exposes it to the risk of volatile currency movements. Any adverse currency fluctuation is likely to impact the company’s operating performance negatively. In the second quarter of 2024, Nu Skin’s revenues were significantly affected by currency headwinds, resulting in a negative impact of 4.2% from foreign currency fluctuations. The company anticipates unfavorable foreign currency impacts of around 4-3% on its third-quarter and full-year 2024 revenues.
The operating environment for Nu Skin’s core business remains challenging, primarily due to macroeconomic factors and pressures within the direct selling industry. Nu Skin now projects revenues in the range of $1.73-$1.81 billion for 2024, representing a 12-8% decline from the previous year’s reported figure. This revised guidance reflects a downward adjustment from the earlier projected range of $1.73-$1.87 billion. Management expects adjusted earnings per share to fall within the range of 75-95 cents, representing a decline from the adjusted earnings of $1.85 recorded in 2023. This projection is also lower than the earlier guidance of 95 cents to $1.35 for 2024.
For the third quarter of 2024, Nu Skin anticipates revenues between $430 million and $465 million, indicating a decline of 14% to 7% from the previous year’s reported level. The company expects adjusted earnings in the range of 15-25 cents per share in the third quarter, compared with 56 cents recorded in the same period last year.
The Zacks Consensus Estimate for 2024 earnings per share has declined from $1.10 to 78 cents over the past 30 days. Similarly, the consensus estimate for third-quarter EPS has fallen from 48 to 20 cents during the same period. This downward adjustment in estimates reflects a negative sentiment among analysts and suggests potential challenges in achieving projected profitability.
Nu Skin is navigating a turbulent period, with its stock performance reflecting the ongoing macroeconomic and industry-specific challenges. While the company is actively pursuing strategic initiatives to revitalize its market presence and drive growth through new product launches and the strength of its Rhyz business, these efforts may take time to yield results. In the near term, the combination of persistent headwinds and tighter guidance suggests that Nu Skin faces a difficult path ahead. Investors should exercise caution and closely monitor the company’s efforts to address these challenges and assess whether its strategic initiatives can effectively offset the current pressures.
Nu Skin currently holds a Zacks Rank #5 (Strong Sell).
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