Nu Skin (NUS) Looks Radiant on Innovation & Solid Digital Efforts
Nu Skin Enterprises, Inc. NUS looks well placed, courtesy of focus on innovation and efforts to strengthen sales leaders as well as expand the customer base. These upsides fueled the cosmetics company’s fourth-quarter 2020 results, with earnings and sales increasing year over year and the former beating the Zacks Consensus Estimate.
Moreover, the company is optimistic about momentum in 2021, driven by impressive product pipeline, robust digital efforts along with steady improvement in customers and sales leaders. For the first quarter of 2021, the company projects revenues of $610-$640 million that indicates an increase of 18-24% year over year. Quarterly earnings are anticipated between 65 cents and 75 cents per share, indicating significant growth from the year-ago quarter’s levels. Incidentally, Nu Skin’s stock has surged 127% in a year’s time compared with the industry’s rally of 78.1%. Let’s delve deeper.
Factors Narrating Nu Skin’s Growth Story
Nu Skin is focused on empowering sales leaders and customer base through product launches and engaging technology platforms among other initiatives. Moreover, the company is conducting a number of promotional seminars online amid the pandemic. Additionally, Nu Skin rolled out its Velocity sales compensation plan as well as enJoy rewards program in the past three years. These programs are doing well and continue to drive growth in sales leaders and customers. In the fourth quarter of 2020, sales leaders were up 29% year over year to 70,435, while Nu Skin’s customer base surged 34% to 1,557,302. Sales leader’s growth was driven by successful introduction of Boost and Nutricentials products.
A shift to work-from-home and at-home trends amid the pandemic has led to increased online shopping, which presents a unique opportunity to the company’s business. With these macro trends, Nu Skin is making significant investments in the digital platform to build a socially-enabled business. In this regard, the company rolled out its personal recommendation app, Vera in 2020. By the end of 2021, Nu Skin intends to expand the Vera experience to add a wellness journey that will be connected to other parts of its portfolio. Further, management is on track to introduce its digital ecosystem, Empower Me.
The company is leveraging its technology to scale up business, grow customers in new segments and expand its affiliate business to younger demographics. In January, Nu Skin announced the buyout of 3i Solutions — an innovative company — which develops and produces ingredients for consumer markets with the help of proprietary encapsulation technologies. Such technologies will help Nu Skin create new product forms as well as boost performance of its formulations in beauty and wellness.
With the help of advanced technology and well-strategized product programs, Nu Skin tries to capture greater market share and maintain growth momentum. In fact, the company’s long-term strategies stand on three key pillars — Products, Programs and Platforms. Notably, management is optimistic about the company’s global introduction of beauty device system —ageLOC Boost (2020). Further, management expects to expand its customer reach via the launch of Boost and Nutricentials products in the first half of 2021. Further, Nu Skin expects to unveil new products in the remaining half of the year.
Wrapping Up
Nu Skin’s gross margin has been contracting year over year for a while now, due to increased freight costs. This was witnessed in the fourth quarter, with gross margin contracting from 75.9% to 74%. Apart from the abovementioned factor, a geographic mix shift owing to strong growth in the West region affected gross margin. In its fourth-quarter earnings call, management highlighted that the downsides are likely to keep putting pressure on gross margin in 2021. Also, escalated selling expenses as well as general and administrative costs were a drag on the company’s performance.
Nevertheless, we believe that this Zacks #3 (Hold) company’s well-knit growth strategies mentioned above are likely to keep it poised amid these headwinds.
3 Key Staple Picks
The Estee Lauder Companies EL, currently carrying a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 10.7%.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The J. M. Smucker Company SJM, currently carrying a Zacks Rank #2, has a long-term earnings growth rate of 1.7%.
United Natural Foods, Inc. UNFI, currently carrying a Zacks Rank #2, has a trailing four-quarter earnings surprise of 13.6%, on average.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
Click here for the 4 trades >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
The Estee Lauder Companies Inc. (EL) : Free Stock Analysis Report
Nu Skin Enterprises, Inc. (NUS) : Free Stock Analysis Report
United Natural Foods, Inc. (UNFI) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
