Shares of Nu Skin Enterprises Inc. lost nearly one-fifth of their value Wednesday after the Provo, Utah-based direct selling firm missed second-quarter estimates and offered third-quarter guidance that fell well below Wall Street’s expectations.
Ongoing problems in the firm’s biggest market, Greater China, figured in both the results and guidance shortfalls.
Shares ended the day down 19.7 percent at $46.52 following the company’s report that net income in the three months ended June 30 declined 73.8 percent to $19.5 million, or 32 cents a diluted share, from $74.4 million, or $1.22, in the 2013 quarter. Stripping out charges for the write-down of its inventory in China and other items, adjusted earnings per share were $1.13, 14 cents below the consensus estimate of $1.27.
With Greater China revenues off 12 percent to $229.9 million, overall sales declined 3.2 percent to $650 million from $671.3 million a year ago. The consensus estimate for revenues was $709 million.
Third-quarter guidance was set for EPS of between 90 and 95 cents with revenues ranging from $620 million to $640 million. Earlier, analysts had projected EPS of $1.68 and revenues of $847.5 million.
Truman Hunt, president and chief executive officer, said that conditions in China had begun to “stabilize since we began accepting new sales leader applications in May after a three-month voluntary cessation.”
The company had stopped scheduling promotional meetings and accepting applications from prospective representatives in China in January as an investigation into the firm’s business practices began. In March, its Chinese operation was fined $540,000 in connection with the sale of products deemed to lack sufficient documentation and activities by unregistered direct sellers of Nu Skin products.
The company’s previous guidance for the second quarter included projections for $100 million in sales in China for its Tru Face Essence Ultra skin-care serum while sales came in at about half that mark.
“We believe this was largely due to the lack of business promotional meetings and the suspension of applications, which impacted the ability of our sales force to build momentum” in the months leading up to the limited-time offer, Hunt said.
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