Usana passes $1 billion mark with strong Asia growth

By Hank Schultz

- Last updated on GMT

Related tags Southeast asia Pyramid scheme

Usana passes $1 billion mark with strong Asia growth
Usana Health Sciences passed the $1 billion mark in annual sales with a strong year-end earnings report that included strong growth in key markets in Asia.

Usana recorded $1.05 billion in annual sales, a 4.1% increase over the year previously. The company also recorded net earnings for its fiscal 2017 of $62.5 million, or $2.53 per share. Sales for the fourth quarter were $273.1 million, compared to $252.9 million in the same period a year previously.

While many in the business sector have lauded the tax reform carried out under President Trump, it hasn’t been kind to all companies, especially those, like Usana, that derive most of their sales overseas. Despite the overall rosy financial picture, the company actually lost money in the fourth quarter because of a one-time $30 million tax bill. The company said the charge is largely due to foreign tax credits and other deferred tax assets that the Company will not be able to realize under the new tax laws.

Usana sells a variety of dietary supplements and personal care items via a multi-level marketing model. Though based in Salt Lake City, UT, the company for a number of years now has derived most of its sales from China and Asia.  The company offered this breakdown of sales numbers:

Net sales in the Asia Pacific region increased by 12.1% to $216.7 million for the fourth quarter of 2017. Within Asia Pacific, net sales:

  •   Increased 14.0% in Greater China;

  •   Increased 24.6% in North Asia; and

  •   Increased 4.1% in the Southeast Asia Pacific region.

Sales in North America and Europe continued to decline, extending a trend that has persisted for several years now.

Internal probe

Sales were up in China despite an ongoing internal investigation of the company’s operations there, which are conducted under a subsidiary called Baby Care Ltd., which the company acquired in 2010. The company has offered little detail of the investigation, which is now more than a year old.

The Asia Pacific region continues to drive our growth,​ said CEO Kevin Guest. Our performance in the Americas and Europe region is not where we would like to see it, but we continue to work on several initiatives for this important region that we believe will be a catalyst to improved performance.

In the wake of Herbalife’s problems with the US Federal Trade Commission (FTC), which culminated in a $200 million fine and a restructuring to allay charges of being an illegal pyramid scheme, Usana unilaterally made changes of its own. These included more precisely delineating customers who were actually trying to build sales organizations, and “preferred customers” who were on the company’s rolls mostly or solely to receive discounts.

The company has more carefully tracked sales to this latter group, to lay to rest charges that compensation to sales associates was based too heavily on signing up additional new associates and not enough on actual sales of products to end users.

We are emphasizing more growth on preferred customers and thats pretty much our ongoing strategy. We just feel that company building that base will help stabilize Usana,​ said COO Jim Brown.

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