Nu Skin's (NYSE:NUS) Q4 Sales Top Estimates But Stock Drops 12.6%
Personal care company Nu Skin (NYSE:NUS) reported Q4 FY2023 results topping analysts' expectations , with revenue down 6.5% year on year to $488.6 million. On the other hand, next quarter's revenue guidance of $417.5 million was less impressive, coming in 13% below analysts' estimates. It made a non-GAAP profit of $0.37 per share, down from its profit of $0.89 per share in the same quarter last year.
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Nu Skin (NUS) Q4 FY2023 Highlights:
Revenue: $488.6 million vs analyst estimates of $476.4 million (2.6% beat)
EPS (non-GAAP): $0.37 vs analyst estimates of $0.28 (29.9% beat)
Revenue Guidance for Q1 2024 is $417.5 million at the midpoint, below analyst estimates of $479.7 million
EPS (non-GAAP) Guidance for Q1 2024 is $0.05 at the midpoint, below analyst estimates of $0.34
Management's revenue guidance for the upcoming financial year 2024 is $1.8 billion at the midpoint, missing analyst estimates by 10.6% and implying -8.6% growth (vs -11.2% in FY2023)
Gross Margin (GAAP): 72.1%, in line with the same quarter last year
Market Capitalization: $859.2 million
“While we continue to work toward our long-term vision of becoming the world’s leading integrated beauty and wellness platform, our progress was impacted by persistent macro-economic pressures and disruptions associated with transforming our business,” said Ryan Napierski, Nu Skin president and CEO.
With person-to-person marketing and sales rather than selling through retail stores, Nu Skin (NYSE:NUS) is a personal care and dietary supplements company that engages in direct selling.
Personal Care
Personal care products include lotions, fragrances, shampoos, cosmetics, and nutritional supplements, among others. While these products may seem more discretionary than food, consumers tend to maintain or even boost their spending on the category during tough times. This phenomenon is known as "the lipstick effect" by economists, which states that consumers still want some semblance of affordable luxuries like beauty and wellness when the economy is sputtering. As with other consumer staples categories, personal care brands must exude quality and be priced optimally given the crowded competitive landscape. Consumer tastes are constantly changing, and personal care companies are currently responding to the public’s increased desire for ethically produced goods by featuring natural ingredients in their products.
Sales Growth
Nu Skin carries some recognizable brands and products but is a mid-sized consumer staples company. Its size could bring disadvantages compared to larger competitors benefiting from better brand awareness and economies of scale. On the other hand, Nu Skin can still achieve high growth rates because its revenue base is not yet monstrous.
As you can see below, the company's revenue has declined over the last three years, dropping 8.6% annually. This is among the worst in the consumer staples industry, where demand is typically stable.
This quarter, Nu Skin's revenue fell 6.5% year on year to $488.6 million but beat Wall Street's estimates by 2.6%. The company is guiding for a 13.3% year-on-year revenue decline next quarter to $417.5 million, an improvement from the 20.4% year-on-year decrease it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 2.3% over the next 12 months, an acceleration from this quarter.
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Operating Margin
Operating margin is a key profitability metric for companies because it accounts for all expenses enabling a business to operate smoothly, including marketing and advertising, IT systems, wages, and other administrative costs.
In Q4, Nu Skin generated an operating profit margin of 3.3%, down 2 percentage points year on year. Conversely, the company's gross margin actually increased, so we can assume the reduction was driven by operational inefficiencies and a step up in discretionary spending in areas like corporate overhead and advertising.
Zooming out, Nu Skin was profitable over the last eight quarters but held back by its large expense base. It's demonstrated subpar profitability for a consumer staples business, producing an average operating margin of 3.6%. On top of that, Nu Skin's margin has declined by 2.5 percentage points on average over the last year. This shows the company is heading in the wrong direction, and investors are likely hoping for better results in the future.
Key Takeaways from Nu Skin's Q4 Results
Sure, revenue and EPS exceeded Wall Street's expectations this quarter. However, guidance was very bad. Specifically, full-year revenue and EPS guidance missed analysts' expectations by a large amount. Next quarter's guidance was no better, with both revenue and EPS again coming in below expectations. Overall, this was a mediocre quarter for Nu Skin. The company is down 12.6% on the results and currently trades at $15.21 per share.
Nu Skin may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
