Direct selling industry had not made a great start to 2022.
Going over the seven major direct sales companies’ third quarter reports, we see external challenges the industry had been facing continued.
Herbalife’s third quarter sales were $1,295 million, representing a 10% fall from last year ($1,431 m). The company’s nine-month total revenue is also 10% less than previous year’s. Management commented on this performance saying it was “below the Company’s expectations”.
Asia-Pacific was the only region that reported growth in this quarter (+10%). This region was led by the growth in India (+37%), and Vietnam (+30%). Latin America reported -9%, North America -11%, EMEA -23%, and China -28%.
Herbalife communicated it would be rolling a new campaign focused on recruiting new distributors. “The softened sales through the third quarter are expected to continue into the fourth quarter,” the management said. And given the rapidly shifting macroeconomic sentiment as well as increased volatility in the marketplace, Herbalife withdrew its 2022 guidance. At the end of the second quarter, management expectation for 2022 was an annual sales decrease of 4% to 10%.
Following these results, Herbalife announced a CEO change on October 31. Michael O. Johnson, a Board member and the former Chairman and CEO was named Chairman and interim Chief Executive Officer to replace CEO Dr. John Agwunobi. Michael O. Johnson served as CEO of Herbalife from 2003 to 2017, Chairman from 2007 to early 2020, and CEO from 2019 to early 2020.
They decided to make this change “in order to provide a spark”, said Michael O. Johnson during the investors call. The company expects to appoint a new CEO in 2023.
Medifast reported $390 million sales in the third quarter, indicating a 6% decline. This represented an improvement though, on the outlook released earlier this year (a double-digit decline).
Company said this quarter’s sales performance was due to lower “Coach” productivity. The average revenue per active earning OPTAVIA Coach was down 13% driven by a decrease in the number of customers supported by each Coach. The total number of active earning OPTAVIA Coaches on the other hand, increased by 9% in Q3.
Despite this decrease in the quarterly sales, Medifast’s annual sales as of end-Q3 are 10% more than what they were in 2021. The company anticipates that full-year 2022 revenue to be in the range of $1.51 billion to $1.59 billion (down from the previously announced $1.58B – $1.66B). To compare, Medifast’s 2021 revenue was $1.526 billion. To offset some of the inflationary pressure, Medifast is implementing a 4.5% price increase. Management also announced they are making some adjustments to their compensation plan to help keep coaches focused on client acquisition.
Natura &Co’s consolidated Q3 net revenue was R$ 9 billion (approx. US$ 1.7 billion), down 6% compared to Q3 of 2021.
Of the business units, Avon International’s quarterly sales declined by 20% and The Body Shop’s by 30%. Natura &Co Latam’s revenue increased 4% and Aesop’s 9%. Natura &Co Latam includes Natura, Avon, The Body Shop Brazil & Hispanic Latam, and Aesop Brazil. Commenting on the results, management said Avon International’s TMEA and APAC regions showed growth while Western Europe had a softer performance. Natura management announced it has withdrawn their revenue guidance, due to ongoing restructuring of the company’s organization and the recent updates on potential changes in its business lines.
In June 2022, Fabio Barbosa became the new CEO of Natura &Co. At that time, the company also announced a reorganization that aimed at increased the autonomy and accountability of business units. Additionally, Natura is revisiting its business model and/or its presence in underperforming markets, while accelerating the integration of Natura and Avon in Latin America. Natura &Co had announced the start of a comparative study for either a potential IPO or a spin-off of Aesop. Fabio Barbosa, Group CEO, said, “Natura &Co posted results in line with the expectations we shared with the market in the previous quarter, with top line trending better, while margins continued to be pressured by the challenging macroeconomic environment marked by high inflation, lower discretionary spending, and foreign exchange impacts.”
Nu Skin posted $537.8 million quarterly revenue (compared to $641.2 million in 2021). This meant 16% decrease. Nu Skin’s worst performance came from its Mainland China region (-44%). This was followed by South Korea (-27%), EMEA (-19%), Japan (-18%), and Hong Kong/Taiwan (-1%). The only positive figure was from Southeast Asia/Pacific (+6%). “Americas” region’s performance was at par, but the U.S. reporting 7% growth.
Commenting on the results, CEO Ryan Napierski said, “Our third quarter results were impacted more than anticipated by worsening macro headwinds, including prolonged COVID-related disruptions in Mainland China, slowdown in South Korea, persistent global inflation and excessive foreign currency pressure.” Management stated they have been achieving improvements in the geographic diversification of the business. Currently, no single market represents more than 20% of the global revenue. This diversification is expected to be beneficial under increasing global volatility and complexities.
Nu Skin’s fourth quarter revenue anticipation is $500 to $550 million (-26% to -18%). For the whole year, they expect $2.20 to $2.25 billion sales (-18% to -16%).
Oriflame reported EUR 220 million sales in the third quarter. This was a 1% decline versus Q3 of 2021. The company’s annual 2022 revenue as of end-Q3 2022 is 11% below last year’s. At the regional level, sales decreased by 5% in Latin America, and by 17% in Asia. In Europe & CIS, sales increased by 5%, and in Turkey & Africa Euro by 10% driven by strong growth in Turkey and Nigeria. Europe & CIS is Oriflame’s largest region, generating more than half of company’s global revenue.
Company stated that during the third quarter almost all its orders (98%) processed were placed online or in the Oriflame app. Oriflame app had 865,000 monthly active users. Oriflame has predominantly been a cosmetics company. However, the wellness category is rapidly growing and its share in company sales has reached 18% in the last quarter.
CEO Magnus Brännström said, “I am pleased to see sequential improvements on sales and margins compared to the previous quarters, although we still have a gap to fill to reach the underlying growth levels and operating profit we are used to. The challenging market and geopolitical conditions remain in several of our markets, impacting our business in different ways.” Oriflame announced its plans to expand into new markets in Europe, starting with Germany in the fourth quarter.
Tupperware’s third quarter revenue was $303 million, down 20% versus Q3 2021. “While we are excited to expand the Tupperware ecosystem to have some of our products available at a major US retailer early in the fourth quarter, we faced internal and external challenges in the third quarter that eroded our business economics,” said Miguel Fernandez, President and CEO of Tupperware. He also noted decelerating top line trends in Asia Pacific and North America, and continuing declines in Europe. These trends were partially offset by continued positive sales growth in South America.
In fact, sales in North America were down 16%, in Asia down 24% and in Europe again, down 33%. Latin America posted 1% growth.
At the beginning of the fourth quarter in the U.S., Tupperware started selling its products in 1,900 Target stores. Miguel Fernandez said this was “an important step in reengaging with today’s shoppers, particularly Gen Zs and millennials, and more affluent consumers who probably have never been to the Tupperware party. We think it’s critical to reach out to a younger and more affluent consumers and bring them into our ecosystem.” During the investors call, WFDSA-reported global direct selling volume of $186 billion was compared to Walmart’s $568 billion sales and Amazon’s $407 billion and described as “tiny”. Therefore, the decision was to take the Tupperware brand beyond direct selling by leveraging its brand recognition and expanding the product reach outside the direct selling channel.
Tupperware announced that as a part of its Turnaround Plan, Hector Lezama has been promoted to Chief Commercial Officer (CCO). He will be responsible for guiding all commercial activities around the world.
USANA’s third quarter sales were $233 million as compared with $274 million during the third quarter of 2021 (-15%). The total number of active customers was also down 18% vs. prior year. All regions posted declining sales in Q3: Americas & Europe -5%, Greater China -11%, North Asia -22%, and finally, Southeast Asia Pacific -27%. 78% of USANA’s global volume is generated in Asia Pacific and 22% in Americas & Europe.
“The challenging operating environment in Asia Pacific and the strengthening U.S. dollar negatively affected our operating results in the third quarter,” said Kevin Guest, CEO and Chairman. “COVID-related disruptions and challenging economic conditions resulting from those disruptions negatively impacted our results in several key Asia Pacific markets where city-wide lockdowns and other COVID restrictions persisted. This difficult operating environment has impacted our entire industry.”
USANA revised its 2022 sales forecast as $955 – $975 million (previously, $1,015 – $1,065 million). This forecasted figure is lower than any of the annual revenues achieved after 2015.
This review here includes Herbalife, Medifast, Natura &Co, Nu Skin, Oriflame, Tupperware and USANA’s global results.
Any opinions, views and beliefs represented in this article are personal and belong solely to the author/s and do not necessarily reflect the opinion, views and beliefs of the organisation and employees of New Image™ International
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