A Review of Last Year Performances
As we now have their last year’s Q4 reports, it is the time for us to take a brief look at how the giants did last year. The group we will cover consists of the six largest publicly-owned direct selling companies, plus the industry leader Amway. As you will see, these companies came with very interesting figures, to say the least.
Let’s take a look at how they have done lately. As a start, I would you to take a glance at the below table:
* Five of the six giants reported revenue decreases in 2015.
* Avon, Nu Skin and Tupperware posted double-digit declines last year.
* Avon, Oriflame and Tupperware has been in a downward trend in the last five years.
Avon reported 20% decline in quarterly sales. Without the impact of foreign exchange rates Avon said, it would have increased by 3% in constant dollars. The number of units sold was down 2% as well. With this, Avon closed the year with net sales of $6.2 billion which represented 19% yearly decrease compared to 2014. Avon’s sales volume has shrunk by 30% in the last five years.
All three regions of Avon contributed to the revenue decline in Q4: Latin America (-26%), Asia Pacific (-16%), and EMEA (-13%). The drop in Latin America is important as this region accounts for about half of Avon’s revenue. Russia, South Africa and Turkey came with pleasing results from the EMEA region.
To remind, North America division is a “discontinued operation” and Avon’s figures no longer includes results from North America. Management announced anyways that they were pleased that the North American unit met the goal of being profitable for the whole year.
Beauty category accounted for 74% of Avon’s revenue in 2015. It was followed by fashion (15%) and home (11%). Beauty category is divided in itself as skin care (40%), fragrances (36%) and color (24%) in value.
“Our operating performance for the fourth quarter and fiscal year was in-line with our most recent outlook. Looking back at 2015, our key local markets drove steady improvement in overall performance. Importantly, we improved year-on-year Active Representative trends – with full-year growth of 1%,” said Sheri McCoy, CEO of Avon.
Last month, Avon announced a Transformation Plan, that included cost reductions to improve the cost structure and to enable the company to reinvest in growth. Sheri McCoy said, “We are on track to close our partnership with Cerberus and fully engaged in executing our transformation plan.”
Avon introduced last year a new brand positioning called “Beauty for a Purpose” in all markets and it looks forward to building upon this in 2016.
Avon will begin to report against its new segments, starting from Q1 of 2016: Europe, Middle East and Africa, North Latin America, South America and Asia Pacific.
Herbalife’s fourth quarter net sales was $1.1 billion, representing a decline of 3.1% compared to the prior year period. Its yearly sales figure was down 9.9%, too.
Without the negative impact of foreign exchange fluctuations, company’s total volume points grew 5% compared to the fourth quarter of 2014. This, as the management said, had significantly exceeded high-end of their guidance which was 1.5% growth.
Five of Herbalife’s six regions contributed to revenue decline: South and Central America (-31%), Asia-Pacific (-17%), Mexico (-14.5%), EMEA (-10.4 %), and North America (-5%). China reported 27% sales increase.
With regard to the FTC investigation, CEO Michael O. Johnson said, “The company is currently in discussions with the FTC regarding a potential resolution of these matters. Possible range of outcomes… could include monetary penalties and other relief, or the closure of these matters without action… And at the present time, the company is unable to estimate a range of potential loss, if any, relating to these matters. We cannot comment on the scope, duration or the outcome of the investigation at this time. We will provide updates when appropriate to do so.”
For 2016, Herbalife expects its net revenue to be between -0.5% and 2.5% as compared to 2015.
Natura said it had conducted a comprehensive strategic review in the light of structural aspects of our market and business in 2015. Based on the findings, it defined actions focused on revitalizing the direct selling channel by:
* Streamlining the portfolio
* Concentrating investments in priority brands and projects
* Reviewing the brand position and strategy
2015 was marked by a sharp contrast between Natura’s Brazil and International Operations. In Brazil, the deterioration in the economic environment, the higher tax burden and the weaker local currency contributed to lower sales. While sales at home declined 7% on a yearly basis, the growth in the international markets was 62%.
Natura’s international markets account for 29% of revenue as of end-2015. This was 19% at the end of the previous year.
As an important step, Natura prepares to open its first retail stores in Brazil in 2016.
For more on Natura’s 2015 performance please click here.
Nu Skin’s quarterly sales growth was -6% and yearly was -13%. Management said “fourth quarter results finished a bit softer than expected” and blamed the lower-than-expected LTO (Limited Time Offer) sales in Korea. Nu Skin also reported 18% decrease in its active field force on a year-over-year basis.
Company’s 2015 revenue was $2.2 billion, representing a total of 30% decline in the last two years. Nu Skin’s sales had peaked in 2013 with $3.2 billion.
All five regions of Nu Skin’s posted negative growths last quarter. The worst result came from EMEA with -20%. But as this region accounts for only 6% of company revenue, its negative impact would not be felt should the other regions had performed better.
As of year-end, China remains as Nu Skin’s top region with a 34% share in its global sales. North Asia generates 31%, Americas 15%, and South Asia-Pacific 14%.
Nu Skin announced it had planned primary product launches for the second and fourth quarters of 2016 and said growth in sales leaders and consumers would be critical to success.
Management expects a local-currency growth in the 2% range for 2016 and a 7% negative impact from the strengthening Dollar. So, the revenue forecast for 2016 is $2.10-2.15 billion
Oriflame reported 4% decline in both its quarterly and yearly sales. Oriflame’s number of active consultants was down 7%, too. 2015 was Oriflame’s fifth consecutive year of negative growth.
CIS region (Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Mongolia, Russia, Ukraine) continued to be a headache for the company. Sales in this region decreased another 30% in the last quarter. Europe was flat, Latin America up 10%, Turkey, Africa and Asia up 28%. With the downward trend, CIS region’s contribution to Oriflame’s global volume went down to 32% at the end of 2015, from 43% in 2014. The number of active consultants in this region decreased by 21% on a year-over-year basis.
Skin care category generated 25% of Oriflame’s sales in 2015. Color cosmetics accounted for 23%, and fragrances 19%. Although growing, wellness category is still a small category of the company, producing 7% of its revenue.
Commenting on the recent re-organization, CEO Magnus Brannstrom said, “During the end of the fourth quarter we took another step towards becoming an even more agile company when we presented a new organisational set-up to further strengthen our position in a more digital world.”
For more on Oriflame’s 2015 performance please click here.
Tupperware’s quarterly revenue decreased by 13%. The most significant contributions to the fourth quarter growth came from Argentina, Brazil, China, and Mexico. In addition to these, Tupperware U.S. and Canada posted a 10% increase last quarter and that came from a 12% larger sales force.
With this quarterly performance, Tupperware closed the year with a sales figure that was 14% less than previous year’s. On the field on the other hand, total sales force was up 5% versus prior year at the end of the quarter, and there were 2% more active sellers in the quarter, the third consecutive quarter with a year-over-year active seller increase.
On a business unit basis, 2015 revenue performances were: Tupperware North America +1%, Asia Pacific -8%, Europe -17%, Beauty North America -17%, and South America -20%.
Not happy with the results, CEO Rick Goings said, “We had a disappointing quarter as we lapped a tough comparison and continued to see an impact from economic and political headwinds in many of our units. While I don’t want to take away from the strong performances in a number of units, our internal actions did not overcome the impact of worse than expected externals in some of our units.” Goings continued, “Given today’s environment, we’re making some defensive moves to allow us to perform financially and to play better offense in implementing our growth strategies.”
Tupperware management’s revenue growth expectation for 2016 is between -4% and -6%.
Since the beginning, this quarterly review has been focusing on the six largest public companies, for two reasons: First, to give an overall picture without boring the readers with so many companies’ figures; second, we only have access to public companies’ reports in detail.
As Amway has been reporting its yearly results regularly in the last few years, we have been adding this giant’s figures to the year-end reviews, too.
According to the announcement, Amway’s global sales last year was $9.5 billion. While this meant 12% year-over-year decline, Amway is still holds leadership position in the industry.
Amway reported its top 10 markets in 2015 as China, South Korea, United States, Japan, Thailand, Russia, Taiwan, Malaysia, India and Ukraine. China alone represents about one-third of Amway’s sales. Amway announced it had experienced growth in seven of these top 10 markets..
For more on Amway’s 2015 performance please click here.
We are getting closer to the end of the first quarter. In about two months’ time, we will be looking at these companies’ quarterly reports.