$1 billion annual sales mark in view as Usana rides Q2 sales boom in China
Usana has seen rapid growth in China in recent years, so much so that one analyst has said it is now “essentially an Asian company”. In addition to the most recent meteoric sales rise there, the company recorded an astounding 98% increase in active distributors in the second quarter. CEO David Wentz, in an earnings call with analysts that was posted in transcript form on the site seekingalpha.com, attributed the increase to staying the course.“We have got a great field of distributors out there who are working hard and doing things right,” he said.
Chief financial officer Paul Jones said the rise could also be attributed to some promotions put in place in the previous two quarters that were coming to fruition.“We are still riding some great momentum and it is a momentum business,” he said.
Usana supplies dietary supplements and functional foods via its network of direct sales distributors. The company touts the scientific underpinning of its products, and claims with changes made to the way in which distributors earn commissions in the wake of Herbalife’s well-publicized problems that had some fallout for the entire industry, its compensation plan is now one of the best.
Guidance ratcheted up
Wentz said another aspect of the sales bump was a buy-up of inventory in anticipation of a price increase slated to take place in the third quarter. That accounted for about $17 million in extra sales. Taking that out of the mix and figuring in the expiration of the effects of the recent promotions, and Wentz said growth was expected to flatten out somewhat in the second half of the year. Even so, the company raised its outlook for the whole of fiscal 2015 and now expects sales to come in at $900 million to $920 million, up from between $870 million and $890 million.
Usana has invested $40 million in new manufacturing space in China that broke ground in 2013. The 319,000-square-foot plant is expected to come on line soon. Wentz said the company has been building up inventory in the country to cover for the transition to the new plant and to provide some cushion for the sales increases. There will be no inventory bottleneck, he said.
“We feel confident that we will not have any inventory problems, but it’s something that we are watching very close and have some creative alternatives. We have actually leased out another floor in our existing facility. We have bought ahead some of the equipment that we will be using in the new facility to increase our productivity. So there are a lot of things that have been done already in place to make sure that we have no supply gaps,” he said.
Earnings details
For the second quarter of 2015, net sales increased to $233.2 million, up 23.9% compared with $188.3 million in the prior-year period. Net earnings for the second quarter increased by 31.7% to $25.4 million, compared with $19.3 million during the prior-year period. Earnings per diluted share for the second quarter increased 41.2% to $1.92, compared with $1.36 in the prior year period.
