Performances From a Profitability Perspective – 2
In this two-part review, we have been looking into industry’s publicly-owned six largest companies’ profits. Last week we covered Avon, Herbalife and Brazil’s cosmetics giant, Natura. This time, we will briefly review Nu Skin’s, Oriflame’s and Tupperware’s figures.
Nu Skin’s profitability has been in a downward trend in the last three years. The decline is not only in absolute terms because of the decrease in sales, percentage-wise each year is worse than the previous one, too.
A major reason behind this situation seems to be the increase in Nu Skin’s product costs. While this cost item was 16% of net sales in 2013, it went up to 19% in 2014 and 22% in 2015.
Nu Skin’s business mainly originates from Asia, and more specifically from China and North Asia. These two regions account for more than 70% of its global volume. So, any headwinds in this part of the world has the potential of hitting Nu Skin’s numbers hard.
Oriflame’s profitability declines in 2014 and stabilizes in 2015, at quite a low level, though.
Company’s headache remains to be its CIS region. Business in this region has been deteriorating for quite some time. In the last three years, sales in this region has decreased by almost half. And the importance of this situation for Oriflame is that CIS countries used to generate half of global volume! This eventually impacts Oriflame’s global profitability. Operating profit coming from Oriflame’s CIS region is as follows: €104 million in 2013, €67 million in 2014, and €36 million in 2015. If things could have been reversed in the CIS region, Oriflame’s profitability would have looked very different today.
One additional important note here is that among the five profitable (Avon posts net loss) public direct sellers we have been looking into last week and this one, Oriflame has the least profitable business. So, a slight hiccup in revenue can take the profit figures into red zone.
Tupperware’s profit goes downward but not sharply in “%” terms. If the revenue could be maintained, profits in $ would be almost stable. But the loss in sales since 2013 has been 15%
Like all US-based direct selling companies, Tupperware’s numbers have been hit by the strengthening of US Dollar. During the investors call, CEO Rick Goings said, “I do want to point out that the foreign exchange impact since 2012, it’s been unprecedented in my business career.”
A strengthening Dollar is today’s reality and tomorrow does not seem to be any different. Those US companies making business in international markets should take the necessary measures sooner rather than later before their balance sheets get worse. Regardless of how successful they can be abroad, those numbers mean less and less when converted to US Dollars. And their investors are much more interested in the figures in the currency they report to the investors, and that is US Dollars.