Nu Skin Falls over 20% on Weak Results and Horrific Guidance
By: Bob Cramer
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Nu Skin Enterprises, Inc. (NUS) is down over 20% following the announcement of its results for the second quarter of the fiscal year 2014 (2QFY14). The company missed both sales and earnings expectations and also provided weak guidance for 3QFY14.

Earnings per share came in at $1.13 falling short of expectations of $1.27 by 11%. Earnings guidance for 3QFY14 is in the range of $0.90 to $0.95 vs analyst estimates which were at $1.68. Revenue guidance was given in the range of $620 million to $640 million vs analyst estimates of $847.5 million.

The company reported a 3% year-over-year (YoY) decline in its revenues to $650 million for the quarter, missing analyst estimates of $708.8 million by roughly 8%. One of the reasons for lower than expected revenue was foreign currency fluctuation which had a negative impact of roughly 2%.

Other reasons for the decline in revenue include weakness in the Greater China and South Asia/Pacific regions. The sales leader count in Greater China dropped 14% and number of activities declined 32% YoY, resulting in a decline in revenues of 12%. In South Asia/Pacific region, revenue declined 5% despite an improvement in sales leader count and activities due to the negative impact of fluctuations in foreign exchange rates.

Other factors which impacted earnings include contraction of gross and operating margins resulting from an inventory write-down in China. General and administrative expenses as a percentage of sales also increased during the quarter causing the operating margins to further contract. In addition, a higher effective income tax rate hit the company’s bottom line.

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