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Nu Skin Gains from Product Launches, Currency Rates Hurt

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Adverse currency headwinds and a sluggish view are making matters worse for Nu Skin Enterprises, Inc. (NUS - Free Report) . Nevertheless, the well-known beauty company is striving to stay afloat on the back of a sturdy customer base and effective product launches. Let’s take a closer look.

Strong Customer Base & Growth Efforts

Nu Skin sells and distributes its products through a network of sales leaders and customers across 50 markets globally. Notably, the company’s top line has been consistently benefitting from growth in consumer count. In the first quarter of 2019, customer base increased 10% to 1,193,206.

This uptick followed after improvements of 16%, 9%, 8% and 7% in the fourth, the third, the second and the first quarter of 2018, respectively. The company relies on social media as well as well-knit product and marketing programs to expand customer reach.

Moreover, with the help of advanced technology and well-strategized product programs, Nu Skin tries to capture greater market share and sustain momentum. In fact, the company’s long-term strategies are based on three pillars — Products, Programs and Platforms. Notably, the launch of the revolutionary ageLOC LumiSpa has been a success. LumiSpa is expected to drive growth in 2019 as well.

Apart from launches, Nu Skin’s well-knit product strategies are driving growth in several market locations. The company has been working to expand sales compensation program, Velocity, across various nations. Management expects that Velocity will be a significant component in the company’s business expansion in the future. Additionally, it focuses on expansion of global beauty device systems on the back of product introductions and line extensions.



 

Headwinds

A major portion of Nu Skin’s revenues is sourced from international markets, which exposes it to significant currency risks. In fact, the company’s top and the bottom line in the first quarter were considerably hurt by foreign currency headwinds. During the quarter, revenue growth was impaired by currency headwinds of approximately 6%. Moreover, management expects foreign currency fluctuations to affect the top line in 2019 by 2-3%.

Adverse currency is likely to weigh on the company’s second-quarter outcome. Management anticipates revenues of $660-$680 million, which indicates 3-6% decline from the year-ago quarter’s level. This includes an expected 4-5% negative foreign currency impact.

Also, the company highlighted that revenues in the prior-year quarter gained from the introduction of LumiSpa in Mainland China. The introduction generated sales of approximately $95 million, consequently making the year-over-year comparison a bit challenging.

Well, such headwinds have exerted pressure on the company’s shares that declined 6.8% in the past three months compared with the industry’s rise of 10.8%.

Wrapping Up

Clearly, adverse impacts from currency are major concerns for Nu Skin.  Nevertheless, prudent product expansion efforts along with optimization of the Velocity sales compensation program are expected to provide some cushion from the aforementioned headwinds. Such upsides are likely to aid the Zacks Rank #3 (Hold) company to make a comeback to investors’ good books.

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