Nature’s Sunshine breaking through in Chinese market, but stubborn losses persist

By Hank Schultz

- Last updated on GMT

Getty Images
Getty Images
Network marketing company Nature’s Sunshine recorded sales increases driven largely by rising sales in China, which is a relatively new market for the company.

Nature’s Sunshine, which sells dietary supplements and personal care products under the Nature’s Sunshine Products, or NSP, and Synergy Worldwide brand names, secured its direct selling license for China in the second quarter of fiscal 2017, making 2018 the first full year of sales in the country.

Getting the license was an unexpectedly protracted process, which hurt financial returns in the meantime.

Chinese market leading the way

Now the company is starting to reap the benefits of the Chinese market. NSP China sales were up 61% on a year over year basis, reaching $11.2 million in the quarter. Sales were up in Central and Eastern Europe, too.

Synergy sales were strong in South Korea, and rose slightly in North America. But the NSP side of the business has seen continual decline in North America, a trend common to most of the MLMs that sell nutritional products.

Experts have attributed this across-the-market decline to the strong job market in the United States, which makes the kind of second job income opportunity offered by network marketing companies less necessary and attractive.

But the company has also had internal struggles in its incentive structure, which new CEO Terrence Moorehead said is being addressed. 

“With respect to NSP Americas, fourth quarter sales were down 7.5% in local currency as the management team is still in the process of stabilizing the business. The strategies and initiatives we are now cascading throughout the organization are designed to stabilize performance. And despite recent results, we believe there's still considerable opportunity to improve our performance and benefit from the positive market growth,”​ Moorehead said in an earnings call that was posted on the site​.

Losses persist

The company has struggled with profitability in recent years. A difficult software implementation exacerbated the earnings hit the company took when the China license was delayed, meaning the investment the company made in the market was not bringing in a positive contribution.

In the fourth quarter 2018 earnings statement, the company recorded  $97.4 million in net sales compared to $88.3 million in the same period a year previously. 

But despite that hefty increase, the company still lost money in the quarter, though the rate of loss is diminishing. Nature’s Sunshine reported an operating loss of $1.2 million or 1.3% of net sales compared with an operating loss of $2.8 million or 3.2% of net sales in the prior year.

Nature’s Sunshine was listed as the world’s 49th largest MLM in 2018 according to the industry publication Direct Selling News​, with $343 million in revenue. But the company sat in 44th place on the magazine’s 2015 list, with $366 million in revenue.  In its fiscal 2018 report, Nature’s Sunshine notched about $355 million revenue.  

The company’s stock price has hovered between $7 and $9 a share in recent quarters, after hitting a recent high of $16 a share in the fall of 2016.

Related topics Manufacturers East Asia China

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