Nu Skin's (NUS) Q4 Earnings Meet Estimates, Down Year On Year

Nu Skin Enterprises, Inc. (NYSE:NUS) released fourth-quarter 2019 results, wherein both earnings and sales declined year over year. Reduced sales leaders, especially in Mainland China, hurt results. Also, Nu Skin continued to battle foreign currency headwinds. Further, management expects the recent coronavirus outbreak to hurt the business in Mainland China in the near term.

Shares of Nu Skin have lost 8.4% in the past three months compared with the industry’s decline of 15.3%.

Q4 Highlights

Nu Skin delivered quarterly earnings of 72 cents a share, which came in line with the Zacks Consensus Estimate. However, the bottom line tumbled 31.4% from adjusted earnings of $1.05 reported in the year-ago period.

Revenues of $583.4 million fell 14.6% year over year. The Zacks Consensus Estimate was pegged at $583 million. Fourth-quarter revenues included a negative impact of 1% (or $6 million) from foreign currency fluctuations. Also, a reduced sales leader count due to declines in Mainland China hurt revenues.

Sales leaders were 54,760, down 25% year over year, with Mainland China accounting for the majority of the decline. In fact, sales leaders deteriorated in all regions, except Japan where it was flat. Further, Nu Skin’s customer base fell 7% to 1,162,905, with declines in all regions apart from EMEA.

Gross profit came in at $442.8 million, down 15.1% from the year-ago quarter’s figure. Gross margin contracted 40 basis points (bps) to 75.9%. Nu Skin’s base business gross margin expanded 60 bps to 78.5%.

Selling expenses amounted to $228.1 million, which accounted for 39.1% of revenues compared with 39.4% in the year-ago quarter. Meanwhile, general and administrative expenses of almost $160 million accounted for 27.4% of revenues, up from 23.9% in the year-ago quarter. The increase can be accountable to higher convention costs.

Operating income more than doubled to $54.7 million and the operating margin grew from 2.7% to 9.4%. Notably, the year-ago period results included impairment and restructuring charges.

Regional Results

Revenues declined across most regions, except Japan where sales improved 2% from the prior-year quarter’s level. The highest drop was witnessed in Mainland China, where the metric declined 29%. Further, revenues fell 9% in the Americas/Pacific, 20% in South Korea, 7% in Southeast Asia, 13% in Hong Kong/Taiwan and 9% in EMEA.

Other Financial Details

Nu Skin, which shares space with Inter Parfums (NASDAQ:IPAR) , ended the quarter with cash and cash equivalents of $335.6 million, long-term debt of $334.5 million and stockholders' equity of $875.3 million. During the quarter, Nu Skin paid out dividends of $20.6 million.

In a separate press release, Nu Skin announced a dividend hike, taking its quarterly dividend from 37 cents per share to 37.5 cents. The raised dividend is payable on Mar 11, 2020, to shareholders of record as of Feb 28. This represents the company’s 19th straight year of a dividend hike, which reflects Nu Skin’s efficient leveraging of a solid financial status.

Guidance

For 2020, Nu Skin focuses on improving sales leaders through technological advancements and product launches. Incidentally, the company’s relaunched Galvanic Spa device was its best-selling product during the fourth quarter of 2019. Also, LumiSpa performed well. The company plans to launch a daily-use beauty device, which is expected to be a robust business driver in the second half of 2020.

However, owing to the recent outbreak of coronavirus, the company decided to put its meetings with sales force and customers on hold in Mainland China. In fact, management expects the outbreak to have a considerable impact on its business in the near term, though prospects in Mainland China are strong for the long run. For now, the company anticipates sales in Mainland China to decline 20-25% in 2020, with expected adverse currency impacts of 1-2%.

Management expects Nu Skin’s overall business to return to growth in the fourth quarter, backed by the planned launch of the daily-use beauty device. Management expects 2020 revenues of $2.17-$2.30 billion, including currency headwinds of 1-2%. In 2019, Nu Skin’s revenues amounted to $2.42 billion. Further, 2020 earnings are projected in the range of $2.00-$2.40 per share, indicating a decline from $3.10 delivered in the prior year. The Zacks Consensus Estimate for earnings is currently pegged at $3.30 per share.

For the first quarter, this Zacks Rank #3 (Hold) company projects revenues of $480-$510 million, including adverse currency impacts of 2-3%. Earnings are anticipated between 22 cents and 33 cents per share. The Zacks Consensus Estimate for first-quarter earnings is currently pegged at 77 cents per share.

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