Nu Skin Down 28% in 3 Months: What's the Next Best Move?

Nu Skin Enterprises, Inc. NUS has not been in its best shape lately, with its shares down 27.7% in the past three months compared with the industry's 21.3% decline. Additionally, this beauty and wellness product company has trailed the broader Zacks Consumer Staples sector and the S&P 500's respective growth of 1.2% and 4.2%.

Despite being a prominent player in the beauty and wellness industry, Nu Skin has struggled to navigate a series of macroeconomic headwinds that have dampened consumer spending, particularly on premium products. Additionally, the company has been severely impacted by stronger-than-expected foreign currency fluctuations and ongoing pressures within the direct selling industry, contributing to a disappointing second-quarter 2024 performance.

Considering the company's first-half 2024 performance and rising foreign exchange headwinds, management tightened the annual guidance range for 2024 in its second-quarter earnings release.

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Macroeconomic Hurdles Persist

Nu Skin has been encountering persistent macroeconomic obstacles, which continued in the second quarter of 2024. The company's performance was hurt by continuous macroeconomic headwinds across most regions, which weighed on consumer spending and customer acquisition, especially for premium products. Additionally, NUS grappled with pressures in the direct selling industry.

These headwinds, along with foreign adverse currency fluctuations, hurt Nu Skin's quarterly revenues, which tumbled 12.2% year over year to $439.1 million in the second quarter. On a constant-currency basis, revenues fell 8%.  Sales leaders were down 16% year over year to 38,592. Nu Skin's customer base dropped 14% to 893,514. The company's paid affiliates were down 17% to 155,486. On an adjusted basis, paid affiliates tumbled 9%.

Volatile Currency Movements

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 second-quarter 2024 revenues witnessed strong currency headwinds. Revenues included a negative impact of 4.2% from foreign currency fluctuations. The company envisions unfavorable foreign currency impacts of around 4-3% on third-quarter and 2024 revenues.

Bumpy Road Ahead

The operating environment for Nu Skin's core business remains challenging, primarily due to macroeconomic factors and pressures within the direct selling industry. Nu Skin now anticipates revenues in the band of $1.73-$1.81 billion for 2024, which suggests a 12-8% decline from the year-ago period's reported figure. Earlier, the metric was expected in the range of $1.73-$1.87 billion. Management envisions an adjusted earnings per share of 75-95 cents. The projection suggests a decline from adjusted earnings of $1.85 recorded in 2023. Management had earlier envisioned an adjusted EPS of 95 cents to $1.35 for 2024.

For the third quarter of 2024, the company expects revenues between $430 million and $465 million, which suggests a decline of 14% to 7% from the year-ago quarter's reported level. NUS expects adjusted earnings in the band of 15-25 cents a share in the third quarter compared with 56 cents recorded in the same period last year.

Estimates Lose Sheen

The Zacks Consensus Estimate for 2024 earnings per share has declined from $1.10 to 78 cents over the past 30 days. The consensus estimate for the third-quarter EPS has tumbled from 48 to 20 cents in the same time frame. This downward adjustment reflects a negative sentiment among analysts and suggests potential challenges in achieving projected profitability.

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Wrapping Up

Nu Skin is navigating through a turbulent period, with its stock performance reflecting the ongoing macroeconomic and industry-specific challenges. While the company is actively pursuing strategic initiatives to reinvigorate its market presence and drive growth through new product launches and the strength of its Rhyz business, these efforts may take time to bear fruit. In the near term, the combination of persistent headwinds and tighter guidance suggests that Nu Skin faces a difficult road ahead.

Investors should remain cautious, keeping a close eye on how the company manages these challenges and whether its strategic initiatives can offset the current pressures. Nu Skin presently carries a Zacks Rank #5 (Strong Sell).

Better-Ranked Staple Bets

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The Zacks Consensus Estimate for The Chef's Warehouse's current financial-year sales and earnings calls for growth of 9.7% and 12.6%, respectively, from the prior-year reported level.

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The Zacks Consensus Estimate for Nomad Foods' current financial-year sales and earnings implies growth of 4.3% and 11.5%, respectively, from the prior-year reported level.

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