So, the time has come for our quarterly review of the six giants’ global growth performances. Here, we take a brief look at sales figures of the six largest publicly traded direct selling companies, as reported.
Among the six companies that are under our radar, Avon and Oriflame posted quite unsatisfactory results.
Avon’s first quarter results were far from being satisfactory, once again: -11% growth! Units sales declined 6% as well. Avon’s CEO Sheri McCoy was not happy but was optimistic, at the same time. She said, “As I look at our first-quarter results, I’m not satisfied with our performance, but I’m encouraged by our progress.We saw significant headwinds that further impacted our financial results, particularly in EMEA. However, we continue to stay the course on our plans to return Avon to sustainable, profitable growth.”
In fact, Avon’s sales decreased in EMEA by 11%. However, it was not the only this region where its growth was suffering. North America was down 22%, Asia-Pacific down 17% and Latin America down 7%. Among Avon’s worst-performing markets were China (-41%), Russia (-23%), and Turkey (-22%).
As it can be seen, North America continues to be a headache for Avon. This region reported an 18% decline in active representatives and 25% decline in units sold.
Needless to say, analysts started questioning the current management as the positive results get delayed. During the Earnings Conference Call, one of the participants asked CEO McCoy, pointing out that the the last three quarters has been the worst the company had in 15 years, “There is a lot of people who are new to direct selling, including you. To what extent some of the errors that have been happening in the U.S. and in China are execution errors of the current team, which simply didn’t know direct selling in the first place?”
McCoy’s answer to this was, “The issues in the U.S. has been going on for a period of time… I’m very pleased and proud of my management team and the teams in the field… And we have fresh thinking as it relates to people within Avon, and we’re working together in concert to do the right things for the business for the long term. It’s about getting the fundamentals right and making sure that we can get our business back on track.”
Avon is now about to end its six-year bribery probe. The probe’s cost to company has summed up to about $500 million so far.
For more on Avon’s Q1 performance, please click here.
Despite all the turmoil around it, Herbalife closed the quarter with an impressive 12% growth in sales. Herbalife achieved sales increases in five of its six regions, namely China (99%), EMEA (25%), North America (12%), South & Central America (11%), and Mexico (7%). Asia-Pacific posted 10% sales decrease.
Commenting on China, Herbalife President Des Walsh said, “We obviously are very pleased with the growth we are seeing in China. And we certainly have an aggressive program in place to identify additional manufacturing opportunities in order to cope with the growth that we see ahead.”
In the EMEA region, the U.K and Russia were surely the shining stars of the first quarter. In the U.K., local currency sales were up 64%. Russia posted a 39% increase in sales, and a 23% increase in active sales leaders against Q1 of 2013.
Herbalife management should also be more than happy especially with the company’s performance in the U.S., where the turmoil actually has been taking place: In the first quarter, sales of Herbalife’s U.S. business increased by 8%. And March 2014 became the largest sales month in U.S. history. Herbalife announced it recruited a record 83,000 new members in the U.S. in the first quarter.
During the Earnings Conference Call on April 29, 2014, CEO Michael O. Johnson commented on the regulatory complaints, saying, “In U.S., there were 7.9 million purchasers of Herbalife products in the three-month period of which 87% were not members… Few members… in the U.S. spent substantial time in the Herbalife business. Of those surveyed, approximately half worked five hours or less in a month and they made an average of $158 in that month. This is consistent with both industry and Herbalife’s specific surveys.”
And on the FTC investigation, he added, “…as we have said publicly, Herbalife welcomed the inquiry given the tremendous amount of misinformation in the marketplace, and we are cooperating fully. We are confident that Herbalife is in compliance with all applicable laws and regulations across the board because facts are on our side.”
For the whole year, Herbalife’s expectation is now to achieve a growth of between 10-12% as compared to 2013. This translates to a sales volume of USD 5.3-5.4 billion.
For more on Herbalife’s Q1 performance, please click here.
Natura, this Brazilian cosmetics giant achieved a solid 15% growth last quarter. Sales increase in Brazil was 9.1%. Natura’s international operations on the other hand, grew by 53%.
Management ties the growth in Brazil mainly to increased consultant productivity. This increase in productivity, according to management, was achieved by the higher investments in marketing and important innovations, and by offering new payment options to the field.
Natura said, since mid-2012, it has been focusing its strategy on expanding the shopping baskets of consumers and as a result, on the productivity of the consultants, working to obtain revenue growth that is better balanced between the number of consultants and their productivity. However, the company said, it achieved only a 0.4% growth in the average base of available consultants in the first quarter, reflecting the channel’s lower activation.
Natura remains to be pre-dominantly Brazil-dependent as this country still represents over 80% of its global volume. In cosmetics and fragrances category, Natura holds over 1/3 of the market in Brazil.
For more on Natura’s Q1 performance, please click here.
Just like Herbalife, Nu Skin has been going through tough times, too. While Herbalife’s problem was the attacks made by a short-seller in the U.S., Nu Skin’s was emanated from China’s regulations. Despite this, Nu Skin ended the quarter with a successful performance: 24% sales increase! The $671 million sales also represented the largest first quarter in Nu Skin’s history.
And more importantly, Nu Skin managed to increase its sales in all of its five regions: China (63%), EMEA (9%), Americas (6%), South Asia/Pacific (6%), and North Asia (5%). Also, an impressive performance for Nu Skin came from Korea last quarter. Korean market posted 38% growth.
CEO Truman Hunt said, “Our results are particularly encouraging given the business disruption we experienced in China during the first quarter.” Hunt describes the first quarter as “the most eventful quarter of my tenure as Nu Skin’s CEO”.
One key observation from Nu Skin’s sales is that the company is becoming more and more China-dependent. While this region’s share in company’s global business was 20% in the beginning of 2012, this has now increased to 42%. Truman Hunt expects a 20% growth in China in the second quarter. This shows China’s share will further increase.
Another important observation here is that with a 20% growth in China on a year-over-year basis, $323 million will be coming from China in Q2. Subtracting this from Nu Skin’s global Q2 target of $700 million leaves us with $377 million. As Nu Skin’s sales in its non-Chinese markets were $414 million in Q2 of 2013, this tells us Nu Skin expects a considerable decrease in sales ($414 m. vs. $377 m.) in these markets.
For more on Nu Skin’s Q1 performance, please click here.
Oriflame’s first quarter was far from being satisfactory: Sales were down 14% as compared to the same period of last year. Unit sales were down by 6% and the number of active consultants by 5%, too.
CEO Magnus Brannstrom blames “sharply devaluating currencies” and “challenges of exceptional nature in the two largest markets Russia and Ukraine”. However, we know that Oriflame has been facing difficulties in these markets for three years now.
From the first quarter of 2014, Oriflame has changed its segment reporting. According to this, regional performances in Q1 were as follows: CIS -24%, Europe -7%, Latin America 7%, and Turkey, Africa & Asia -1%. In other words Oriflame posted a positive growth only in Latin America, business wise a small region that generates 8% of company’s global volume.
In fact, Oriflame has not been growing for the last three years now. As the table on top of the page shows, the last time the company posted a yearly growth was in 2010. Careful eyes will notice that the Oriflame’s sales decrease in the last three years is almost the same as Avon’s in the same period, in percentages. And naturally, this performance has been reflected on Oriflame’s share prices. Nowadays, one Oriflame share is worth at the Stockholm stock exchange about half of its value three years ago.
For more on Oriflame’s Q1 performance, please click here.
Tupperware did not post a U.S. dollar-growth last quarter; sales were flat as compared to last year. In local currency though, the company achieved a 7% growth. CEO Rick Goings said, “Once again, the strength of our emerging markets was able to mitigate the challenges we faced in some of our established markets as we continued to work through the implementation of strategies to drive future growth.”
In fact, Tupperware’s established markets were down 1% in Europe, flat in Asia-Pacific, and worst of all, down 8% in the U.S. and Canada. Emerging markets on the other hand, reported 14% growth in local currency, globally. This group of countries generated 64% of Tuperware’s business. Among the emerging markets, the most spectacular results came from China (29%), Indonesia (25%), Brazil (23%), and Turkey (19%).
The management is especially be happy with the results in Indonesia as this market is Tupperware’s largest business unit. Commenting on this, CEO Goings said, “If you look at the underlying key performance indicators… they were all strong and supported this kind of sales growth. So we would say the growth that we saw in Indonesia was really high quality. This is a well-run business and it’s the fourth largest country in the world by population.”
North America continues to be an area of concern for Tupperware. Although the -8% growth in the U.S. and Canada was tied largely to the party cancellations due to the extreme weather conditions, “We believe that in North America, we’ve got some work to do on our overall North American business model,” added, CEO Goings. And when asked what they would do, he said, “I’m not at all thinking of a restructuring in the U.S… The business moved more from a weekly business to a monthly business because that’s what bonuses were paid off of, monthly, and a lot of the promotions were monthly. That, if I was sitting here grading papers, mistake. You don’t do that. The rhythm of a week, one of the keys of success of this company for so many years is there’s an assembly on Mondays and we meet every week… So we’ve got to weigh the rhythm. We’ve got to get that back. “
For the whole year, Tupperware’s global target is 12% growth in local currency and 2% in USD.
For more on Tupperware’s Q1 performance, please click here.
This concludes our brief review of the first quarter. Let’s see what the rest of the year will show us….