Nu Skin Shares Tank 25% As Profit Plunge, Poor Outlook

(RTTNews) - Nu Skin Enterprises Inc. (NUS), Wednesday said its second-quarter profit plunged from a year ago, hurt largely by lower revenues and a hefty write-down of China inventory.

Shares of the direct-selling company plummeted 25 percent after it detailed a poor outlook for the second-half of the year, as it struggles in its biggest market China.

"In the second half of 2013, we generated approximately $560 million of sales volume from the LTO launch of our TR90 weight management system. This significant sales event, combined with the temporary cessation of marketing activities in China in the first half of this year, will raise difficult comparisons in the second half of 2014," CEO Truman Hunt said.

Nu Skin, the skin care and nutritional products maker, commenced its business in China after it was fined $540,000 by regulators for illegal marketing activities and false product claims.

Looking forward to the third quarter, Nu Skin expects earnings of $0.90 to $0.95 per share and revenues of $620 million to $640 million. Analysts polled by Thomson Reuters currently expect earnings of $1.68 per share and revenues of $847.46 million for the third quarter.

The company expects fourth-quarter earnings of $1.00 to $1.05 per share and revenue of $650 million to $675 million.

Nu Skin's second-quarter profit plunged to $19.51 million or $0.32 per share from $74.44 million or $1.22 per share last year.

The company's bottom line was impacted by a $50 million write-down of Mainland China inventory and a $25 million charge due to a transition to the SICAD II exchange rate in Venezuela.

Excluding special items, earnings were $1.13 per share for the second quarter. On average, seven analysts expected earnings of $1.27 per share for the quarter. Analysts' estimates typically exclude special items.

Nu Skin's second-quarter revenues declined 3 percent to $650.03 million from last year's $671.33 million. Analysts had a consensus revenue estimate of $709.03 million for the quarter.

Sales from Greater China, which contributes almost third of the total revenues, fell 12 percent.

Gross margin decreased to 76 percent from 83.4 percent, while operating margin dropped to 8.4 percent from 17.1 percent last year.

NU Skin said it would restate its first-quarter results to include a $21 million charges to reflect high inflation in Venezuela and tax rebate for its China headquarters. The company expects the restatement to negatively impact its first-quarter profit by about $9.4 million.

NUS is currently trading at $43.67, down $14.25 or 24.60%, on the NYSE.