Will Nu Skin Mainland China Woes Worsen Due To Coronavirus?

By Zacks Investment ResearchStock MarketsMar 09, 2020 09:51PM ET

www.investing.com/analysis/will-nu-skin-mainland-china-woes-worsen-due-to-coronavirus-200514847

Will Nu Skin Mainland China Woes Worsen Due To Coronavirus?

By Zacks Investment Research | Mar 09, 2020 09:51PM ET

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Nu Skin Enterprises, Inc. (NYSE:NUS) has been in troubled waters for a while now due to persistent softness in Mainland China, stemming from limited sales meetings. Notably, this was intensified when the COVID-19 outbreak compelled management to put meetings with sales force and customers on hold in the region, per the latest conference call. In fact, management expects the novel coronavirus pandemic to considerably affect the business in the near term.

Clearly, jitters concerning the virus and continued hurdles in Mainland China have been weighing on investors’ sentiments. Shares of Nu Skin have crashed 43.2% so far this year compared with the industry’s decline of 30.3%.

Incidentally, Nu Skin anticipates sales in Mainland China to decline 20-25% for 2020, with the majority of the fall anticipated in the first half. For 2020, management expects overall revenues of $2.17-$2.30 billion compared with $2.42 billion recorded in 2019. Foreign currency fluctuations are likely to affect revenues for 2020 by 1-2%. Further, 2020 earnings are projected to be $2.00-$2.40 per share, indicating a decline from $3.10 delivered in the prior year.

Well, the novel coronavirus has wreaked havoc on the global market, adversely impacting most industries. Companies operating in or sourcing goods from China remain majorly affected. Companies are largely bearing the brunt of soft traffic, store closures and limited hours of operation. Also, cosmetic players like Inter Parfums (NASDAQ:IPAR) are delaying product launches, given the current situation and its chances to persist in the near term at least. Additionally, coronavirus and its deadly spread beyond China have reduced global travel, which is a blow for biggies like Estee Lauder (NYSE:EL) .

Mainland China Headwinds Hurt Q4 Results

Coming back to Nu Skin, this Zacks Rank #5 (Strong Sell) company has long been battling hurdles in the Mainland China region. Notably, revenues and sales leader counts were soft in the region throughout 2019. This resulted from strong negative media coverage of several industries in the region (including food, health and direct-selling industries) and government restrictions on meetings, which play a major role in creating sales leaders.

As a result, the aforementioned hurdles have adversely impacted sales leaders. In the fourth quarter of 2019, Nu Skin’s sales leaders were 54,760, down 25% year over year, with Mainland China accounting for the majority of the decline. Also, the highest revenue drop of 29% was witnessed in Mainland China. During the quarter, both top and bottom lines declined year over year for the third straight time.

Nu Skin, which shares space with Coty (NYSE:COTY) , has been making solid efforts to expand the customer base and improve sales leaders. However, it remains to be seen how far these endeavors can help the company tide over the current boulders.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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The Estee Lauder Companies Inc. (EL): Free Stock Analysis Report

Nu Skin Enterprises, Inc. (NUS): Free Stock Analysis Report

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Will Nu Skin Mainland China Woes Worsen Due To Coronavirus?

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