The third quarter has elapsed and year-end is in sight. It’s time to review the third quarter figures from the “Big-6” (i.e. world’s six largest public direct selling companies) and the expectations for the rest of 2014. Let’s see who has been doing things right so far this year and who has been doing not-so-right.
“We began the year with the expectation that the second half of 2014 would show improvement relative to the first half and Avon’s third-quarter results are consistent with modest improvement on both top and bottom line,” said Avon’s CEO Sheri McCoy.
However optimistic she might have been, Avon’s sales is still in the downward direction. The third quarter was down 8% in revenue in USD and 4% down in units sold. Avon’s revenue in the first nine months was 11% less than what it was last year. So, reversing the direction in Avon’s sales shown on the below graph that started in 2011 will not be possible this year, too.
Q3 sales in Avon’s Latin America region was down 12% in line with the performance in the nine-month period. McCoy described the situation in Brazil as “sluggish”. Following a series of good results in 2012 and 2013 in Brazil, Avon’s performance weakened in the Q2 of 2014, and was again not-so-good in the third quarter. In North America, the negative performance was even stronger. This region’s decrease in quarterly sales was 16%. Avon CEO says, they have “a long road ahead to get the Avon business to where it needs to be” in North America. Latin and North Americas together represent 62% of Avon’s volume.
EMEA (30% of global volume) region’s sales was flat as compared to last year, and Asia-Pacific’s (8% of global volume) was up 4%. EMEA’s better-than-expected was largely driven by Russia, according to Avon management.
On the country level, quarterly sales in the U.K. increased by 12%, in South Africa by 6%, in Russia by 4%, and in Brazil by 1%.
Having noted these on the sales growth side, Avon posted USD 188 million operating profit in the last quarter. This was roughly three times higher than Avon’s Q3 performance in 2013, and was probably the reason behind Sheri McCoy’s optimism in her statement. The increase in operating profits was mainly due to the USD 205 million reduction achieved in expenses.
For Avon’s Q3 report, please click here.
Herbalife reported 4% sales growth in the last quarter. Following the growths in the first quarter (12%) and in the second (7%), does this represent a new trend in the direction of slowing down? Herbalife management says, does not. Without the sharp negative impact of economic situation in Venezuela, company’s growth in the third quarter would have been 7%, same as the previous three-month period.
The highest quarterly growth came from Herbalife’s China region (33%) followed by EMEA (13%), and Asia-Pacific (5%). South & Central America was down 15% and North America down 5%. Herbalife has for a long time, been proudly saying it had been posting growth in all of its regions, but seems this is over at least for now. Still, Herbalife managed to achieve sales increase in two-thirds of its countries.
Following the first quarter of 2014, Herbalife’s year-end expectation was to achieve a growth of between 10-12% as compared to 2013. This translated to a sales volume of USD 5.3-5.4 billion. As Herbalife’s sales after the first nine months was USD 3.25 billion, it will need to generate more than USD 2 billion in the last three months to achieve that. This was very difficult, if not impossible. So, now the management has revised the yearly growth target for 2014 as 3.5-4.3%. As Herbalife’s sales growth in the first nine months was 7.6% in 2014, this means Herbalife expects a stronger head wind in the last quarter, a quarterly growth performance of -5% to -8%.
Herbalife CEO Michael O. Johnson said, during the earnings call, “We have invested significantly in Herbalife innovation and manufacturing. Today, roughly 40% of our products are self-manufactured and we expect to grow to 65% by the end of 2016, with the addition of our Winston-Salem facility in North Carolina and the expansion of our manufacturing capabilities in China.”
For Herbalife’s Q3 report, please click here.
Natura came up ended the third quarter with a positive growth performance. Natura’ sales increase in Brazil, in its largest market was 2.7% and its international markets grew by 29%. Company’s consolidated quarterly sales increase was 5%. Natura’s consolidated growth in the first nine months was 7%.
81% of Natura’s business comes from Brazil, and 19% from its other markets. Natura has 20% market share in the Brazilian cosmetics industry.
Looking at last these and also at past quarters’ figures, one might ask if Brazil has become a mature market for Natura representing less and less growth opporunities. If this is so, shouldn’t the company have a more agresssive international expansion strategy?
For Natura’s Q3 report, please click here.
Nu Skin came up with a record sales decrease this quarter: Down 30% as compared to the third quarter of 2013 ($639 m vs. $908). Nu Skin’s growth in the first nine months was also -8%.
The main reason behind this was the poor comparative performance in China. In Q3 of 2013, Nu Skin’s sales in China was $450 million and this dropped to $227 million this year. Company management says this difference was due to Nu Skin’s limited-time-offer sales in China in Q3 of 2013 ($154 m) and this year’s limited-time-offer sales ($59 m). Nu Skin’s self-imposed restrictions on recruitment in China earlier in 2014 ended up with a decline in the sales leader count by 57% and in the number of actives by 43% compared to the prior-year period.
Along with China, South Asia/Pacific (down 30%), Americas (down 9%), and EMEA (down 9%) were other problem-regions for Nu Skin. The only region that came up with good news for Nu Skin was North Asia. Sales in this region was up 2% in the third quarter. However, this 2% was totally driven by foreign currency fluctuations, according to company’s statement.
Nu Skin expects a revenue between $590 million to $610 million in the fourth quarter. This brings the company to $2,550-$2,570 million at the end of the year. And this is substantially lower than Nu Skin’s 2013 sales ($3,177 million)
For Nu Skin’s Q3 report, please click here.
Although at a slower pace this time, Oriflame’s sales still continued to shrink in the last quarter: -7%. Company’s growth figures in 2014’s previous quarters were: -14% in each of Q1 and Q2. The number of active consultants also decreased by 2% in the third quarter. With this performance, Oriflame’s sales growth in the total of first nine months is -12%, comparing to last year. This is the worst among the six companies analysed here.
CIS region (Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Mongolia, Russia, and Ukraine) remained to be a head ache for Oriflame last quarter. Following double- digit negative growths for several quarters, sales decrease in Q3 was 16%. To remind, Oriflame’s problems in this region had started long before the political turmoil kicked off between Russia and Ukraine. This region is very important accounting for more than 40% of company’s global volume.
As you see on the table below, on a nine-month basis, Oriflame managed to grow only in two of its regions in 2014: Latin America and Turkey, Asia & Africa. These two regions together represent 30% of Oriflame’s business.
CEO Magnus Brannstrom commented on results, saying, “We have continued challenges ahead of us, especially related to exchange rates and macroe-conomic development in some of our main markets. At the same time, I am very pleased to see continued strong development in Latin America, Turkey, Africa & Asia.”
While reporting the Q3 figures, Oriflame also announced a top-level organizational change, appointing a new “Group Management” team. In addition to the CEO, Deputy CEO and CFO, this Group Management will consist of seven Vice Presidents: Jonathan Kimber, Tesselschade Naaijkens Van Dijk, Mats Palmquist, Johan Rosenberg, Thomas Ekberg, Michael Cervell, and Antonia Simon-Stenberg.
For Oriflame’s Q3 report, please click here.
Tupperware’s sales in the last quarter was down 2% as compared to Q3 of 2013. Company’s nine-month performance was also 2% less than that of last year’s.
The markets that made Tupperware happy in Q3 were Argentina (45%), China (24%), Indonesia (14%), Turkey (9%), and Mexico (9%). In North America, Tupperware’s quarterly sales increase both in the U.S. and Canada was 3%.
Tupperware management’s expectation is to close 2014 with a growth performance of between -2% and -3% as compared to 2013.
For Tupperware’s Q3 report, please click here.
Let’s see how these giants will perform in the last three months of the year…