Nature’s Sunshine hits sales soft patch, cuts full year outlook

Nature’s Sunshine saw falling sales in its second quarter and cut its full year earnings outlook in its most recent quarterly report. The sales slowdown was attributed to economic headwinds and a business disruption in North America caused by a digital platform switchover.

For the second quarter of 2024 the company reported total net sales of $110.6 million. This was a 3% year-over-year drop on a constant currency basis compared to 2023 when the company notched sales of $116.5 million. The company noted that the second quarter of 2023 was one of the best in its history, making for a difficult comparison.

Nature’s Sunshine, which is based in Lehi, Utah, sells products in many markets worldwide. In Asia its primary markets are in mainland China, Taiwan, South Korea and Japan.

In an earnings call with stock analysts, CEO Terrence Moorehead noted that “the widely reported economic slowdown continued to affect our business in China.” CFO Shane Jones noted that sales in China specifically fell by 26% on a constant currency basis.

The ongoing housing crisis slowed the Chinese economy almost to a halt in terms of growth in the second quarter, according to official government statistics. The country is reportedly sitting on 20 million presold but unfinished housing units.

Additional headwinds came in the form of a wave of new tariffs around the globe against Chinese goods. And excess factory capacity raises the possibility that manufacturers will have to start cutting prices to spur demand so that they can put those factories to work and pay the loans on them.

Sales in Asia fell 3.2% on a constant currency basis and were off 3% in North America. Sales dropped most sharply in Latin America, though that is by far the smallest of the company’s markets.

The only market where sales were up was in Europe, where sales rose slightly less than 1% on a constant currency basis.

Like many supplements industry multi-level marketing companies, Nature’s Sunshine is wrestling with how best to transition its business from the tradition MLM face-to-face model into the digital realm. It’s difficult to strike the right balance, because if online sales are too easy and streamlined, consumers might question the need for the independent distributors acting as middlemen.

Morehead said part of the issue in its North America sales had to do with a digital platform transition the company undertook during the quarter.

The new platform was aimed at improving the customer experience on multiple devices, Moorhead said.

“Today about 65% of our digital transactions occur on mobile devices,” he said.

The new platform allows for faster load speeds, especially on those devices, he said.

“It was a temporary disruption to the business,” said Moorehead. “It will take some time for our nutritional health practitioners and especially our retailers to adapt to the new system.”

With the problems in China and the slow rollout of the new digital platform, the company is revising its full-year revenue outlook downward to $436 million to $435 million. That would represent a 0% to 2% rate of growth on a constant currency basis, said Jones.

Stock traders were flummoxed by the company’s outlook downgrade. The company’s shares lost almost 13% in value since the earnings announcement yesterday. Shares were trading at about $12.85 on Friday. The company’s recent high share price was $20.87, which was achieved on April 1, 2024.