USANA 2015 Q1 Net Sales Up 20.3% To $219.4 Million

USANA, President, Kevin Guest

 

USANA Health Sciences, Inc. (NYSE: USNA) recently announced financial results for its fiscal first quarter ended April 4, 2015. The Company also increased its financial outlook for 2015.For the first quarter of 2015, net sales increased by 20.3% to $219.4 million, compared with $182.4 million in the prior-year period.

The increase in net sales was driven by 41.9% growth in the number of active Associates, largely as a result of strong Associate growth in the Company's Asia Pacific region. Net sales, on a comparative basis, were positively impacted by:

(i) continued momentum from the incentive program that the Company offered during the fourth quarter of 2014, which carried over for several weeks into the first quarter of 2015 in China, (ii) incremental sales that occurred ahead of price increases announced in China during the quarter, and (iii) a more favorable operating environment in China compared to the prior-year period.

The Company estimates that the incremental sales ahead of the price increases in China contributed approximately $12 million to net sales for the quarter. Net sales, on a comparative basis, were negatively impacted by $9.2 million due to a strengthening U.S. dollar.

Net earnings for the first quarter increased by 19.0% to $19.7 million, compared with $16.5 million during the prior-year period. The increase in net earnings was driven by higher net sales. Although gross margins improved year-over-year by 100 basis points, and selling, general and administrative expense decreased relative to net sales, higher Associate Incentives expense offset these improvements.

On a relative basis, Associate Incentives expense increased 300 basis points, due largely to the previously noted incentive program. Although we expected Associate Incentives to be elevated again during the first quarter as a result of this incentive, it came in modestly higher than anticipated.

Earnings per diluted share for the quarter increased 30.4% to $1.50, compared with $1.15 in the first quarter of the prior year. The increase in earnings per share was attributable to higher net earnings and a lower number of diluted shares outstanding due to the Company's share repurchases during 2014. Weighted average diluted shares outstanding were 13.1 million as of the end of the first quarter of 2015, compared with 14.4 million in the prior-year period. During the first quarter of 2015, the Company did not repurchase any shares of common stock.

The Company ended the first quarter with $128.6 million in cash and cash equivalents, zero debt and $61.2 million remaining under the current share repurchase authorization.

The first quarter was an excellent start to another promising year for USANA, said Kevin Guest, USANA's President. Our results for the quarter were better than expected, notwithstanding the typical pressure from the Chinese New Year and continued headwinds from a strengthening U.S. dollar. As reported, our double-digit sales, earnings and customer growth during the quarter were driven by the strong momentum we continue to see across our business and higher-than-expected sales in China.

We also recently announced plans to enter Indonesia later this year, which will mark a milestone 20th market for USANA. Indonesia represents an excellent growth opportunity for our company in a market whose middle class is expected to double over the next five years. Our team is enthusiastic about the potential of this new market opportunity in Asia, a region that continues to generate significant growth for USANA, continued Mr. Guest.

Regional Results

Net sales in the Asia Pacific region increased by 31.4% to $155.9 million, compared with $118.6 million for the first quarter of the prior year. This year-over-year increase can be attributed to 43.0% sales growth in the Greater China region, 12.1% sales growth in the Southeast Asia Pacific region, and 26.6% sales growth in the North Asia region.

Sales growth in Greater China was driven by triple-digit sales and customer growth in Mainland China, while growth in Southeast Asia Pacific resulted from double-digit sales and customer growth in most markets in that region. Finally, sales growth in North Asia was driven by double-digit sales and customer growth in South Korea.

The number of active Associates in the Asia Pacific region increased by 58.5% year-over-year, and increased 9.8% sequentially. Net sales in the Asia Pacific region were negatively impacted by $5.5 million, on a year-over-year comparative basis, due to a strengthening U.S. dollar.

Net sales in the Americas/Europe region were essentially flat at $63.5 million, due primarily to continued pressure from a strengthening dollar, which negatively impacted sales by $3.7 million. The Company's results in this region were driven by double-digit local currency sales growth in Canada and Mexico. The number of active Associates in this region increased by 4.9% compared to the prior-year period.

We continue to see strong sales and customer growth in most of our markets worldwide and expect this momentum to continue during 2015, continued Mr. Guest. While China continued to lead the way, it is noteworthy that we generated double-digit growth in many of our markets around the world. Customer growth continues to be our primary objective, as we focus on improving the overall health and nutrition of individuals and families around the world.

Outlook

The Company provided the following updated consolidated net sales and earnings per share outlook for 2015:

  • Consolidated net sales between $870 million and $890 million, versus the previous outlook of between $850 million and $870 million
  • Earnings per share between $6.45 and $6.75, versus the previous outlook of between $6.40 and $6.70

USANA generated solid results during the first quarter, said Chief Financial Officer, Paul Jones. We are updating our outlook for 2015 due to our stronger-than-expected first quarter performance and the general momentum we are seeing in our business. While Associate Incentives expense was elevated again this quarter as a result of the incentive program that carried over into 2015, we expect this expense to begin to trend down beginning in the second quarter. Our outlook includes the previously announced investments to strengthen our infrastructure, build even greater brand-awareness, and drive product and technology innovation. Our outlook also reflects our confidence in the fundamental strength of our business, ability to execute our growth strategies, and belief that 2015 will be another record year for USANA.

Get more information, facts and figures about USANA, click here for the USANA overview.

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