NUS | BLACK BOOK PRESENTATION REPLAY

We added Nu Skin (NUS) to the Hedgeye Consumer Staples Best Ideas list as a SHORT.

 

SHORT NUS – 11/11/15 Call Replay and Slides

Link to Audio Replay

Link to Video Replay

Link to Slide Deck

 

On Wednesday November 11th, we walked through our short thesis on Nu Skin (NUS), a multi-level marketing company that distributes primarily skin care product. Below is a brief overview of the material that we went through.

NUS | BLACK BOOK PRESENTATION REPLAY - CHART 1A

BUSINESS BREAKDOWN

China is the largest region by revenue for NUS, representing 33% in 4Q15. It is also the region that had the sharpest decline in both sales leaders and revenue from 2013 to 2014.

NUS | BLACK BOOK PRESENTATION REPLAY - CHART 2A

LACK OF MARKET SHARE

Nu Skin is a small player in the global Beauty and Personal Care category, with only a 0.3 value share.

NUS | BLACK BOOK PRESENTATION REPLAY - CHART 3A

VITAMEAL

NUS | BLACK BOOK PRESENTATION REPLAY - CHART 4A

NUS | BLACK BOOK PRESENTATION REPLAY - CHART 5A

VitaMeal is becoming increasingly meaningful to the NUS income statement, on both the top and bottom line.

NUS | BLACK BOOK PRESENTATION REPLAY - CHART 6A

The money flows of the charities are inviting scrutiny.

NUS | BLACK BOOK PRESENTATION REPLAY - CHART 7A

BALANCE SHEET

Lackluster inventory management, inventory levels are currently 1 standard deviation above the long-term average.

NUS | BLACK BOOK PRESENTATION REPLAY - CHART 8A

SUSTAINABILITY

With the current trajectory of downward trending sales leaders and declining revenue per sales leaders NUS’s business model is not sustainable.

NUS | BLACK BOOK PRESENTATION REPLAY - CHART 9A

NUS | BLACK BOOK PRESENTATION REPLAY - CHART 10A

Please call or e-mail with any questions.

Howard Penney

Managing Director

Shayne Laidlaw

Analyst