The First Six Months: An Overview
Now the time has come once again. We now have the quarterly reports from the largest publicly-owned direct selling companies, and it is the time to review and summarize them. You will see in the article that the second quarter made all of these companies but one, quite happy this year. Let’s have a look at their performances and see how each of them did in the first half of the year.
Avon reported a negative growth for the second time this year. After the first quarter (- 4%), the second quarter ended with -2% as well, as compared to the same periods of 2012. Within the whole picture, Avon’s beauty segment declined by 4% last quarter.
Avon’s more successful markets in Q2 were Mexico (12%), Russia (6%) and Turkey (6%). Company management expressed its happiness with the results particularly in Russia, driven by a strong active representative growth. Turkey’s performance was owed to a change in the compensation structure that aimed at improving productivity.
And poor performers in Q2 were China (-27%), North America (-14%) and U.K. (-8%). Venezuela’s performance (-22% in USD) was solely due to the 32% devaluation in this country.
Yes, North America still remains to be problem area for Avon. It certainly is a very important business to the company but as the management put it, “they’ve been working for probably 18 months now trying to stabilize it, and it’s clear that they’re not getting the results that they desired.”
CEO Sheri McCoy said, “Looking back at the past three quarters, it’s clear that Avon is headed in the right direction. But please remember that there is a long road ahead of us. We anticipate some variability in our financial performance as we work through the turnaround and make the decisions necessary to position us well for the long term.”
Herbalife posted an impressive 18% sales increase in the last quarter. Proud of this performance, Michael O. Johnson, Chairman and CEO, says, “We reported our fifteenth quarter in a row of double digit top-line growth, reflecting the success that our products and distribution model are having in markets around the world.” Herbalife’s six-month growth this year is also very high: 17.4%
Herbalife’s highest growth came from its China region (49%). To remind, this region represents now the smallest of Herbalife’s regions. This was followed by South America region (33%) and EMEA (16%).
Once again, Herbalife produced highly satisfactory results from North America. Company’s growth in the region was 11% in Q2. Herbalife recruited 80,000 new distributor in the second quarter, a record as the management says. According to a survey performed by Nielsen, 3.3% of the U.S. adult population which is roughly 8 million people, have purchased an Herbalife product within the three month period. And 87% of these said they were non-distributors.
An important announcement from Herbalife was on the terminology. The company said it decided to change the name “distributor” to “member” since most of its participants were discount buyers. This new terminology will be implemented worldwide, the U.S. market being to first to adapt.
Natura’s growth in the second quarter was 6.7% versus prior year. Unhappy with this result, management reports, “In Brazil, revenue growth in the quarter fell short of our expectations, especially in June, affected mainly by the lower pace of orders from consultants and the lower-than-expected impact from launches in the period.”
We know that Natura’s is a pre-dominantly Brazil-driven business. Natura’s market share in its product category is still over 21% in Brazil. But its international business grows with a high rate, too. Now, the share of international markets in Natura’s global business volume has reached 13.6%. The management is especially happy with the progress in Argentina.
For the rest of 2013, the company reaffirms its expectations of accelerating growth. This is expected to happen through an innovation plan and higher marketing investments. Natura management plans to intensify marketing investments to have more frequent orders from consultants.
Nu Skin has remained on the happier side of the biggies. The company’s sales increase in Q2 was 15%. And the mid-year performance as compared to 2012 was 17%.
China was the highest-contributing region of all with a 35% increase. It was followed by Americas (17%). EMEA region, the smallest of all for Nu Skin, once again was a poor performer. Quarterly growth in this region was 2%. North Asia which did not perform so well in USD due to foreign currency fluctuations, is expected by the management to be a USD 1-billion-market for the company within few years.
With these results, Nu Skin’s growth remains to be driven by China+North Asia. These two regions account for more than 2/3 of the company’s global volume.
CEO Trumant Hunt said, “Given the growth momentum of the business, we are again increasing the sales forecast for the remainder of the year. We expect the upcoming launch of ageLOC TR90 and the strength of the business in several key markets will lead to another record year as annual revenue will approach the $3 billion mark.”
The company forecasts the Q3 revenue to be between $790-$810 million.
Tupperware closed the quarter with an 8% increase in sales. With this, its mid-year performance this year, as compared to 2012 is 5.7%.
Rick Goings Chairman and CEO, commented, “Once more, the emerging markets have been the key driver of sales and profitability this quarter with particularly strong growth across both South America and Asia.” In fact, emerging markets, accounting for 65% of Tupperware’s sales, achieved a 14% increase. Among the shining stars of this quarter were Indonesia (36%), Brazil (32%), Turkey (27%), India (24%) and China (20%).
With regards to the Turkish market, Rick Goings says during the earnings call, “This business continues to grow there. We’ve got a younger, better educated population there. And by the way, I was amongst them. I had our whole board there just last year. Now if anybody’s worried about Turkey going the way of Iran, forget it. There’s a young, dynamic college educated population that is really the European part of Turkey won’t happen. Incredibly, in this Muslim country, we’ve got a dynamic young woman that’s the head of our business there. I think you’ve got to first go to our finance head, the only guy in the senior management team. That’s the future of Turkey.”
It was promising news for Tupperware that came from North America this time. Tupperware United States and Canada sales were up 4% versus prior year. The company cites the reasons behind this as “a result of improving key business indicators and an aggressive promotional approach”. Profitability being impacted negatively, CEO Goings says, “We believe we spent too much on promotions in that market, which we’re not going to do in the future.”
Based on the current trends, Tupperware expects to close this year with a growth of between 4-5%.
Normally this quarterly review has been covering the “Big-6” (the above companies plus Oriflame). However, this time Oriflame’s quarterly report was announced to be online only by August 15. In order not to keep you all waiting for so long, Oriflame is not included in this summary report.