Nu Skin's Q4 Felt Like Deja Vu As December Sales Trends Disappoint

Deutsche Bank's Bill Schmitz noted the December sales results reported by Nu Skin Enterprises, Inc. NUS was once again disappointing, similar to December 2015.

The analyst maintained a Buy rating on the company, with a price target of $63.

Positives

Schmitz mentioned, however, given Nu Skin’s meaningful innovation activity and the absence of ineffective promotions in the US, Korea and Japan, along with issues with the ageLOC Me cartridge being available in China, the company’s business continues to be on track, with robust “latent potential as the long road to recovery in the market continues.”

Among the positives reported by Nu Skin in its Q4 results, the analyst noted the lower pricing of Me products had been boosting consumptions, while gross margins were mostly robust.

“Despite worse than expected results this quarter and weaker than expected guidance for the March quarter, company maintained its full year guidance and while there are clear challenges of hitting it,” Schmitz went on to say, pointing out that only a few companies in the segment were growing organically at the targeted range of 4-6 percent, with a clean balance sheet “poised for redeployment.”

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Negatives

On the other hand, the negatives the analyst intends to monitor include the fact that sales leaders in China, which is a crucial indicator of broader business growth, were well below the estimates, although Nu Skin’s management remained confident that acceleration would occur here on in.

The full year guidance is back half loaded, and heavily dependent on the success of new products, such as the upcoming LumiSpa.