Nu Skin Enterprises Inc.’s shares dropped more than 41 percent at one point on Thursday following a report in the Chinese newspaper People’s Daily on Wednesday that questioned the direct seller’s recruiting and selling practices. Shares closed at $84.80, down 26.4 percent, on Thursday on the New York Stock Exchange.
The company immediately fired back at the newspaper report stating the article “contains inaccuracies and exaggerations” and that reporters did not attempt to verify any information with Nu Skin.
On Thursday, Nu Skin said it was aware that Chinese regulators have initiated investigations to review issues raised in the article, and that the company will “communicate openly with regulators.” The company also said that it has launched its own “province-by-province business review.” Nu Skin stated, “Given the substantial growth in our China sales force over the last year, we are also taking additional steps to reinforce our training and education efforts. As we work through this evolving situation and remain focused on long-term growth, there will likely be a negative impact on China revenue, but it is too early to know whether our previous guidance will be affected.”
Nu Skin’s business in China has been growing at a rapid clip. Stifel reported that in 2012, Greater China accounted for 26 percent of Nu Skin’s total sales, which amounted to $2.17 billion that year, and Mainland China accounted for 12 percent of sales. For 2013, Stifel has forecasted that Greater China accounted 44 percent of sales, or an estimated $954.8 million, and Mainland China accounted for 32 percent, or roughly $694.4 million, and the financial firm had expected those numbers to grow steadily this year.
ConsumerEdge Research analyst Javier Escalante said the allegations — whether credible or not — are a reminder of the challenges of direct selling. Escalante said, “The inherent risk of the direct-selling business model is the difficulty to control the selling practices of [sales representatives],” and ensuring they adhere to both the company practices and country regulations.
China — which at one point banned direct selling — “has always been uncomfortable with the direct-selling business model,” he added.
The allegations have left many financial observers, who were once incredibly keen on Nu Skin, feeling uncertain about the company’s prospects. “It’s a total mess,” said a source familiar with the company, adding that clarity on the scope and size of the allegations are needed before the stock can rebound.
After hosting meetings with Nu Skin in Singapore and Hong Kong, including with chief financial officer Ritch Wood, Deutsche Bank analyst Bill Schmitz wrote in a research note on Thursday, “Management has assured us its model is clean and noncompliant distributors will be dealt with accordingly, in cooperation with the government.”
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews