Nu Skin Enterprises, Inc. NUS is treading a volatile path, with its shares down a major 40.1% in the past six months. Due to a tough macroeconomic landscape and elevated selling costs, the company has lagged the industry’s decline of 27.6%. The beauty and wellness product company has also lagged the Zacks Consumer Staples sector and the S&P 500’s respective gains of 3.2% and 11.5% during the same period.
NUS Six-Month Price Performance vs. Industry, Sector & S&P 500
Image Source: Zacks Investment Research
Technical indicators are also not supportive of NUS’ performance. The company is trading below its 50 and 200-day moving averages, indicating potential weakness in the stock's momentum.
Nu Skin Grapples With Macroeconomic Concerns
Nu Skin has been encountering persistent macroeconomic obstacles, which continued in the third quarter of 2024. In several markets like South Korea and China, macroeconomic hurdles are affecting consumer spending. The company also grappled with pressures in the direct selling industry in the United States. These headwinds, along with adverse foreign currency fluctuations, hurt Nu Skin’s quarterly revenues, which tumbled 13.8% year over year to $430.1 million in the third quarter. Sales leaders were down 19% year over year to 38,284. Nu Skin’s customer base dropped 15% to 831,768. The company’s paid affiliates were down 20% to 149,264. On an adjusted basis, paid affiliates tumbled 11%.
Nu Skin’s strong international presence exposes it to the risk of volatile currency movements. Any adverse currency fluctuation is likely to weigh on the company’s operating performance. Nu Skin’s third-quarter 2024 revenues witnessed strong currency headwinds. Revenues included a negative impact of 3.4% from foreign currency fluctuations. The company envisions unfavorable foreign currency impacts of 1-2% and 3-4% on fourth-quarter and 2024 revenues, respectively.
Higher Selling Costs: A Worry for NUS
Nu Skin is witnessing high selling expenses. As a percentage of revenues, selling expenses increased to 39% in the third quarter of 2024 from 37.6% in the prior year, driven by shifts in the geographic mix and higher sales force costs. For the core Nu Skin business, selling expenses rose to 43.5%, up from 41.7% in the third quarter of 2023. This upward trend in operating costs is concerning, particularly as revenues continue to decline. While management aims to optimize these expenses through new sales performance plans, the elevated cost structure poses risks to near-term profitability.
Challenges Ahead for Nu Skin?
The operating environment for Nu Skin's core business remains challenging due to macroeconomic factors and pressures within the direct selling industry. Inflationary pressures, political uncertainty and weak consumer sentiment in key markets are likely to persist into 2025. Despite efforts to stabilize its business, Nu Skin lacks clear visibility into when its core direct-selling business might return to growth. Taking into account persistent pressure in the core Nu Skin business, management lowered its 2024 outlook in its third-quarter earnings release.
Nu Skin now anticipates revenues in the band of $1.70-$1.73 billion for 2024, which suggests a 12-14% decline from the year-ago period’s reported figure. Earlier, the metric was expected in the range of $1.73-$1.81 billion. Management envisions adjusted earnings per share (EPS) of 65-75 cents. The projection suggests a decline from adjusted earnings of $1.85 recorded in 2023. Management had earlier envisioned an adjusted EPS of 75-95 cents for 2024.
For the fourth quarter of 2024, NUS expects revenues between $410 million and $445 million, which suggests a decline of 9% to 16% from the year-ago quarter’s reported level. The company expects adjusted earnings of 19-29 cents a share.
Reflecting the negative sentiment around Nu Skin, the Zacks Consensus Estimate for the current and next fiscal years has trended downward, going from 78 to 72 cents and from $1.05 to 98 cents, respectively, over the past 30 days.
What’s Next for NUS Investors?
Nu Skin faces a challenging road ahead, with significant headwinds clouding its outlook. A difficult macroeconomic landscape and pressures in the direct selling industry have been hurting the company’s performance. Volatile currency movements also add to the woes.
Although innovative launches, strength in the Rhyz business and strategies under Nu Vision 2025 position Nu Skin for long-term growth, its current financial struggles suggest that investors should exercise caution in the short term. At present, NUS stock carries a Zacks Rank #4 (Sell).
3 Solid Bets
Ingredion Incorporated INGR manufactures and sells sweeteners, starches, nutrition ingredients and biomaterial solutions derived from wet milling and processing corn and other starch-based materials. The company currently sports a Zacks Rank #1 (Strong Buy). INGR has a trailing four-quarter earnings surprise of 9.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Ingredion’s current financial year’s earnings indicates growth of 12.4% from the year-ago reported number.
Freshpet Inc. FRPT manufactures, distributes and markets natural fresh meals and treats for dogs and cats. It currently carries a Zacks Rank #2 (Buy). FRPT has a trailing four-quarter earnings surprise of 144.5%, on average.
The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings implies growth of 27.3% and 228.6%, respectively, from the prior-year reported levels.
US Foods Holding Corp. USFD, together with its subsidiaries, engages in the marketing, sale and distribution of fresh, frozen and dry food and non-food products to foodservice customers in the United States. It currently carries a Zacks Rank #2. USFD delivered an earnings surprise of 3.7% in the last reported quarter.
The Zacks Consensus Estimate for US Foods Holding’s current fiscal-year sales and earnings indicates growth of 6.4% and 18.6%, respectively, from the prior-year reported levels.
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