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Nu Skin's Customer Base Bodes Well, Mainland China is a Worry

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Nu Skin Enterprises, Inc. (NUS - Free Report) is losing sheen, thanks to volatilities in Mainland China along with an unimpressive view for 2019. Such headwinds have exerted pressure on the stock, which declined 13.3% in the past three months against the industry’s rise of 2.7%.  Nevertheless, the company has managed to keep the business afloat on the back of a robust customer base as well as effective product strategies. Let’s take a closer look.

Customer Base & Other Upsides

Nu Skin sells and distributes its products through a network of sales leaders and customers. Notably, the company is benefitting from growth in consumer count. During the second quarter of 2019, Nu Skin’s customer base inched up 1% to 1,160,420. This indicates that the company’s strategic initiatives to attract consumers are yielding. Management is committed to boost customer strength by developing platforms for effective engagement and empowering programs.

Also, the company relies on social media as well as well-knit product and marketing strategies to widen customer reach. With the help of advanced technology and well-strategized product programs, Nu Skin tries to capture greater market share and sustain growth momentum.

In fact, the company’s long-term strategies stand on three key pillars — Products, Programs and Platforms. In this context, the company focuses on product launches to meet consumers’ changing needs. Notably, the launch of the revolutionary ageLOC LumiSpa is a success. Additionally, the company is also working to expand its sales compensation program — Velocity — across different nations. Management expects Velocity to be a significant driver and expand the company’s business in the future.

Factors Hurting the Stock

Adverse market conditions in Mainland China was a major deterrent to Nu Skin’s performance in second-quarter 2019. The recently completed 100-day government campaign in the region to inspect offerings of nutrition and direct sales led to adversities like limited sales meetings, media scrutiny and unfavorable consumer sentiments. As a result, revenues from the Mainland China region plunged nearly 24%. Moreover, sluggishness in this region led to 14% year-over-year decline in overall sales leaders.

Further, management provided an unimpressive outlook for 2019, thanks to headwinds in Mainland China. It expects overall revenues in the range of $2.48-$2.52 billion, which suggests decline of 6-8% from the year-ago quarter’s tally. Earnings are projected in the range of $3.20-$3.35, which indicates decline from $3.52 delivered in the year-ago quarter.

Apart from these, adverse currency impacts are a concern. Management expects foreign-currency fluctuations to affect the company’s revenues in 2019 by almost 3-4% and nearly 2% in the third quarter.

Wrapping Up

This Zacks Rank #3 (Hold) company is undertaking several initiatives to accelerate growth in Mainland China in the second half of 2019. This includes prudent product launches and incentives systems. We expect such moves to revive performance in the region in the forthcoming quarters. This, along with an encouraging customer base is likely to enable the company to maintain its position in the beauty space.

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