Now, it is the time for us to take a brief look at what the six giants did last year. This group consists of the six largest publicly-owned direct selling companies. As you will see, some of these companies closed the year with smiles on their managements’ faces, while others with concerned looks.
– Companies listed in alphabetical order. –
Avon continues to lose blood. In the last quarter of 2013, total revenue was down 10%, total units sold down 10%, and active representatives down 5%, globally.
North America still seems to be one of the most important problem areas since it is the homeland of Avon as wells as a very important market in size. Q4 sales growth in North America was -21%. In North America, Avon’s beauty sales declined by 25%, driven primarily by skincare and personal care, and fashion and home sales declined 16% in the last quarter. When commenting on this, CEO Sherry McCoy said, ”I want to acknowledge the results we released … reflect a continued deterioration of the North American business. I know this is an area of concern for you, as it is for us.” Management also admits that stabilization will take time in North America.
Whole of 2013 taken, Avon’s sales decreased by 5.7% as compared to 2012. With this, Avon posts negative growths in two consecutive years, 2012 and 2013.
Geographically speaking in Avon’s regional divisions, sales in Latin America in 2013 was down 3%, in EMEA down 1%, in North America down 17% and in Asia-Pacific down 16%.
During the Earnings Conference Call, CEO Sherry McCoy said, “In some cases, driving improvement has been more challenging and has taken longer than I had anticipated. That being said, we continue to make progress toward building a better, simpler and more stable business.”
CFO Kimberly Ross says, “Based on where we are in our turnaround, we are not going to be giving a specific target for the year. We expect to continue to make progress towards our three-year financial goal of mid-single-digit constant dollar sales growth and low double-digit adjusted operating margin. In terms of revenue, the recovery is taking longer than we expected and it will take us some time to reverse the trends that caused the recent deceleration. To that end, we don’t expect to resume sales growth until the second half of the year.”
Among growth and profitability, Avon’s current management has another very important issue to deal with that was inherited from previous management: Bribery investigation. Avon now announces it may cost as much as $132 million to settle this bribery investigation. The management also cautioned there were no assurances it would reach a settlement and if it does, the company could not estimate its timing.
To remind, Sherry McCoy was appointed as CEO in February 2012 to replace Andrea Jung. Since then, McCoy has made significant top management changes at Avon.
Herbalife is one of those that came up with impressive figures. Company’s fourth quarter growth as compared to previous year was 20%, marking Herbalife’s 17th consecutive quarter of double-digit growth.
With this quarterly performance, Herbalife increased its sales in 2013 by 18.5% from 2012.
“Herbalife delivered another year of record financial performance achieved through the consistent execution of key strategies to expand daily consumption of our products,” said Michael O. Johnson, Herbalife’s CEO, and “The financial strength of our business has never been stronger and was the best in our company’s 34-year history,“ he added during the fourth quarter earnings call.
Herbalife’s yearly sales increases in its five regions were as below:
South &Central America:41%
North America: 8%
It is important to note here that, things in Asia-Pacific seems is not going that well for Herbalife. With a 24% share in company’s global volume, Asia-Pacific is Herbalife’s biggest region. In the last two quarters of 2013, Herbalife’s performance lagged behind last year’s.
Calling Bill Ackman “a Wall-Street gambler”, CEO Michael O. Johnson said on this issue, “The points that we have millions of customers and the majority of our members join for product discounts, not for the business opportunity, disproves Ackman’s claims.”
Despite all the negative publicity that happened especially in the U.S., Herbalife said it managed to achieve the largest number of new members in Herbalife’s U.S. history. Approximately 280,000 new members joined Herbalife in 2013 in the U.S., on an average of approximately 23,000 new members per month.
Natura closed the year with a satisfactory 10.5% growth. The management said it was especially happy with the results in Natura’s Latin American markets outside Brazil. These markets accounted for 14% of Natura’s business as of year-end and the company has maintained an annual growth rate in excess of 30% over the last few years there.
For Natura, the year 2013 was important from two aspects:
1) “Natura Network” which leverages digital technologies and connectivity to boost direct sales, was successfully tested in one region to be rolled out in other regions of Brazil in 2014.
2) The strategy of “going beyond cosmetics and beyond Latin America” was put into effect in 2013 by the acquisition of Aesop, an Australian company.
Looking into the future, CEO Alessandro Carlucci says, “Natura will become substantially different over the coming years.”
Established in 1969, Natura is Brazil’s largest company in the cosmetics industry, with a presence in Argentina, Chile, Mexico, Peru, Colombia, Bolivia and France. Natura employs 7,000 staff in these countries and has 1.6 million consultants on the field.
For more on Natura’s 2013 performance, please click here.
As of now, we only have preliminary figures from Nu Skin. On the announcement made, the company said its estimated Q4 revenue was USD 1.075 billion. Adding this to what Nu Skin sold in the first nine months (USD 2.161 billion), we reach an estimated year-end figure of USD 3.236 billion. This represents an impressive yearly growth of 49% as compared to 2012, and a 160%-growth over a five-year period.
Nu Skin’s quarterly sales figures in 2013 were as below:
Q1: USD 550 million
Q2 USD 683 million
Q3: USD 928 million
Q4: USD 1.075 billion
The reason behind rescheduling the announcement of full report, CEO Truman Hunt said, was the current review of Nu Skin’s business in China and their “desire to provide the most informed guidance possible.” You might remember that Nu Skin has been under investigation in China. The company commented on this, saying, “As part of our initial review, we were disappointed to learn that during our recent rapid growth, there were instances where some of our sales people failed to adequately follow and enforce our policies and regulations.”
Oriflame’s revenue in the last quarter of 2013 was down 10%. As a result, the company closed the year with a sales figure that was 5.5% below last year’s.
“During the fourth quarter, CIS and Europe underperformed. The revised Success Plan introduced in the CIS region last year has not yet resulted in desired effects, and thus after evaluating the first phase further improvements will be introduced during the spring. In addition, strong currency headwind is impacting sales and profit negatively and Ukraine continues to be a challenge fuelled by the recent development in the country,“ comments CEO Magnus Brannstrom.
The “CIS and Baltics” region of Oriflame’s consists of Armenia, Azerbaijan, Belarus, Estonia, Georgia, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Mongolia, Russia, and Ukraine. This region accounts for about half of Oriflame’s global business and has been a problem area for Oriflame for the third consecutive year now. The last time Oriflame saw growth in this region was in the first quarter of 2011. And the worst figure came in the very last quarter: -16%!
EMEA was another source of dissatisfaction for Oriflame this year. Sales was 5% less than what it was in 2012.
The positive growths achieved in Latin America and Asia were far from covering the losses, due to their small absolute contributions to Oriflame’s global business.
With all these, Oriflame posts a negative growth for the third time, after 2011 and 2012. Despite all, CEO Magnus Brannstrom keeps his optimism, saying, “Looking at the operations, I feel confident about the new product launch plan, the development of our online business and the upcoming improvements in our sales and recruitment activities. I am also pleased to see that our measures to drive efficiency are progressing well in
line with plan.”
For more on Oriflame’s 2013 performance, please click here.
Tupperware’s fourth quarter sales was up 1%, and the yearly sales up by 3.4%.
CEO Rick Goings commented, “We continued to deliver steady top line growth in the quarter. Focusing on oursales force remains our top priority, as increasing its size is key to delivering consistent growth in our business. We had a meaningful sequential increase in total sellers in the quarter, closing the year with 2.9 million worldwide, a 4% increase over the end of 2012.”
Among Tupperware’s markets, the shining stars of Q4 were Indonesia (33%), South Africa (28%), Turkey (24%) and China (20%). The reason behind Venezuela’s 54% growth has been explained by the company as being “higher prices due to inflation”.
Just like Oriflame, CIS has been a problem for Tupperware, too, with -31% growth in Q4. But CIS is not the only headache for Tupperware: Sales was down 14% in Germany, a large market of Tupperware’s, and down 3% in the US and Canada. Maybe the biggest headache comes from BeautiControl, though, Tupperware’s cosmetics brand. BeautiControl posted -23% growth in the last quarter. Commenting on this, CEO Goings said, “BeautiControl. What do I say? It continues to struggle.”
Regular readers would know that this quarterly review has been focusing on the largest six public companies, for two reasons: First, not to bore the readers with many companies’ figures; second, we only have access to public companies’ reports in detail.
However, for the second time, Amway reported its yearly figures. According to the announcement made, Amway’s global sales last year was USD 11.8 billion. This represented a 4.4% growth from 2012 (USD 11.3 billion).
With this, Amway has kept its leadership position in the global direct selling industry.
The markets with the most sales remained the same as last year: China, India, Japan, Korea, Malaysia, Russia, Taiwan, Thailand, Ukraine and the U.S, in alphabetical order, due to the fact that Amway did not release national data. Based on a report though, we know Amway increased its sales by 8% in China, a market where about 41% of its business is coming from.
This concludes our short review of past performances of some of the giants in the industry. Let’s see what this year will look like.