Moving towards the end of the year, now is the time to briefly review companies’ third quarter reports. As we always do, we will focus on world’s six largest public direct selling companies, Avon, Herbalife, Natura, Nu Skin, Oriflame, and Tupperware, in alphabetical order.
We once again, see on the reports that the US-based direct sellers have been suffering from the unfavorable impact of currency exchange rates. Since this does not seem to be a transient situation in the short-term, we have all the reasons to expect managements to seriously consider ways of softening this impact. The brief review we have here takes “reported” figures into consideration, but not “constant Dollar” figures or numbers in “local currencies”. U.S. companies choose to do this to show the headwinds they take because of currency rates.
Avon’s quarterly revenue declined sharply, by 22% as compared to the third quarter of 2014. Together with this, Avon’s 9-month sales performance is 19% behind that of last year’s.
Total units sold decreased by 6%, driven by declines in Latin America and North America. Active representatives were also down 1% year-over-year, led by a continued decline in North America. Number of active representatives in North America is down 13%.
Avon recorded sales decreases in all of its regions: Latin America -26%, EMEA -19%, North America -17%, and Asia-Pacific 16%.
Avon’s worst-performing markets on the other hand, were Brazil (-42%), Russia (-29%), and Mexico (-20%).
During the earnings call made with the investors, CEO Sheri McCoy said, “This was clearly a difficult quarter. Avon continues to face unprecedented headwinds.”
As a response to what I said above about US-based managements taking measures against currency headwinds, Avon stated it would:
1) Continue to drive core Avon business to ensure it is engaging representatives, aggressively manage pricing and drive profitable growth at the local level.
2) Drive additional resources to its top markets, selectively invest in the brand and improve the Avon representative experience, to allow improvements in the profitability.
3) Reshape its business, including the organization and cost structures, to both improve short-term fundamentals and drive long-term sustainable profitability.
Having heard the same comments from Avon’s management over and over again, Citicorp’s representative at this meeting was quite right in asking, “You used the words evaluating strategies. But I feel like we’ve heard for like three years that you’ve been evaluating strategy, so I wonder how you’re doing that.” If you wish to read the whole script, please click here.
For the whole year of 2015, Avon said it expected the revenue to be 19% lower than 2014.
For more on Avon’s Q3 performance, please click here.
Herbalife’s sales in the third quarter was down 12%, same as its nine-month performance when compared to last year.
Once Herbalife management was proudly reporting company’s growth in all of its six regions. Last quarter all regions but China (24% growth) posted decreases: South-Central America (-33%), Asia-Pacific (-25%), Mexico (-21%), EMEA (-11%), and North America (-2%). Leaving China aside, Herbalife’s third quarter revenue is down 18%.
Herbalife management said it was especially happy with the performance in North America last quarter. The number of active new members in North America was up 33% compared to declines of 16% in the second quarter and 28% in the first quarter, all compared to the prior year period.
For the fourth quarter, Herbalife estimates a decline of 5.5% to 8.5% in net sales.
Looking ahead, CEO Michael Johnson said, “We just completed our five-year planning process, where we laid out a strategy for continuing growth for the years ahead and we have never been more excited about where we are going as a company or more confident about the future.”
For more on Herbalife’s Q3 performance, please click here.
At the end of the third quarter, Natura management was complaining about the sharp contrast between their results in Brazil and elsewhere. In Brazil where Natura traditionally has been most successful, its results were hit by a high tax burden and local currency depreciation.
Natura’s net sales was down 9.6% in Q3 in Brazil. Natura was happy on the other hand, with its relatively less significant international operations. This segment posted 75% growth in the third quarter, increasing its contribution to volume from 19% to 32% on a year-over-year basis. Company’s consolidated net revenue was down 7% in Q3.
As of end-third quarter, Natura had 1.835 million consultants on the field, of whom 1.334 million were in Brazil.
To me, it is so interesting to see how conservative Natura has been in opening to other markets with the extremely positive experience (and cash!) it had accumulated over the years in Brazil.
For more on Natura’s Q3 performance, please click here.
Nu Skin’s quarterly sales dropped by 12% from $639 million in 2014 to $571 million this year. Nu Skin received strong hits from its North Asia (-18%) and China (-17%) regions last quarter.
During the call with the investors, CEO Truman Hunt said, “It’s difficult to determine a single root, because the softening coincided with the sharp stock market decline in August in China… Our Greater China management team also has felt that continued product discounts were negatively impacting the market by conditioning sales representatives to focus on these product discount promotions.”
Company’s sales leaders on the other hand, increased in number globally 6% year-over-year in the quarter and 5% sequentially.
Nu Skin management believes they will return to growth with the launch of the ageLOC Me skincare system. Together with China this line will also be introduced in Japan and South Korea. ageLOC Me, Nu Skin says, “enables the consumer to customize a skincare regimen based on one’s needs and preferences and is designed optimally for the Japan and South Korea markets, which tend to be very skincare centric markets.”
Few months ago, Nu Skin announced it had appointed Ryan Napierski as its new Head of Global Sales and Operations. Ryan Napierski had been with Nu Skin for over 20 years and most recently he was President of Nu Skin’s North Asia region.
Nu Skin projects fourth-quarter revenue of $570 to $590 million, which will mean a 10+% decline in full year of 2015 from 2014.
For more on Nu Skin’s Q3 performance, please click here.
Oriflame reported € 263 million sales in the third quarter which was 4% down from last year. Company had decreases in the number of active consultants (-5%) and in the total units sold (-10%), too.
CEO Magnus Brannstrom said, “We are pleased to report double digit growth in both Latin America and Turkey, Africa and Asia. These markets now account for close to half of the total sales with an increased contribution to the overall profitability of the group. Although challenges remain in CIS and Europe the development is improving, suggesting that the efforts of driving activity are starting to pay off.”
CIS, in fact, remains to be a big challenge for Oriflame. Once a very important region of Oriflame’s, it has shrunk by 32% in the last quarter, following double-digit declines every quarter for a very long time.
In its Europe region, Oriflame’s sales was flat as compared to last year. Latin America increased by 8% and Turkey, Africa and Asia region by an impressive 31%.
For more on Oriflame’s Q3 performance, please click here.
Tupperware’s sales was down 11%. All business units but North America contributed to the decline. Tupperware North America’s sales was flat compared to last year this quarter.
As far as the individual markets are concerned, the most significant contributors to third quarter growth were Brazil, China, Indonesia, and South Africa. Among its established markets, Tupperware was especially happy with the performances in Tupperware U.S., Canada, France and Italy. But for France and Italy, the management added, they’ve got “more ahead there” with regard to needed improvement.
For the full year, Tupperware expects the sales in local currency to be even to up slightly in Europe, to increase 3-4% in Asia Pacific, to be up high-single digit in Tupperware North America, to be down 5% in Beauty North America and to increase of 23-24% in South America.
The Company’s current expectation for 2016 local currency sales growth is 5-7%. Based on current exchange rates, this would result in sales in dollars being even to up 2%.
For more on Tupperware’s Q3 performance, please click here.
It’s almost year-end with only a few weeks to go. Let’s see how these giants will close the year.