Nature's Sunshine(US:NATR)2024-05-08 00:00Financial Data and Key Metrics Changes - Consolidated net sales for the first quarter were $111 million, a 4% increase on a constant dollar basis compared to the prior year, and a 2% increase including foreign exchange impact [78][12] - Operating income rose to $4.6 million from $0.2 million in the same quarter last year, while GAAP net income attributable to common shareholders was $2.3 million or $0.12 per diluted share, compared to $0.9 million or $0.04 per diluted share in the prior year [12][78] - Gross margin increased by 33 basis points to 71.2% compared to 70.8% a year ago, driven by gross margin improvement initiatives, partially offset by inflation and unfavorable foreign currency exchange [82][12] Business Line Data and Key Metrics Changes - Digital sales surged by 33%, with new customer growth increasing by 34% and average order value improving by 10% compared to the prior year [51][44] - In North America, sales grew by 5% to $36.5 million, driven by strong digital adoption and new customer increases [81][78] - Sales in Asia Pacific grew by 5% on a local currency basis, with Taiwan reporting a 15% increase [49][80] Market Data and Key Metrics Changes - Sales in Europe increased by 2% on a local currency basis, reflecting strong performance in Central Europe driven by new product launches [10][39] - In Japan, sales were up 3% on a local currency basis but down 8% net of foreign exchange due to currency fluctuations [8][12] - Sales in China were down 13% or 9% on a local currency basis, impacted by poor macroeconomic conditions and deteriorating consumer sentiment [7][3] Company Strategy and Development Direction - The company is focused on an omnichannel approach, emphasizing digital transformation and field activation to drive growth [74][40] - A commitment to achieving $10 million in gross cost of goods savings is in place, with expectations for gradual improvements in gross margins throughout 2024 [5][46] - The company aims to expand its digital footprint while enhancing the performance of practitioners and retailers [74][40] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about long-term potential in China despite current economic challenges [3][9] - The company anticipates continued fluctuations in gross margins due to mix, seasonal promotions, and fluctuating costs, but remains committed to achieving financial targets [46][55] - Management is confident in the ability to drive positive momentum in 2024 and beyond, despite external challenges [40][14] Other Important Information - The company repurchased 105,000 shares for $1.8 million during the quarter, with $15.8 million remaining in the share repurchase program [13][12] - EBITDA slightly improved to $9.2 million, flat compared to the prior year, reflecting macroeconomic pressures [37][12] Q&A Session Summary Question: Can you provide insight on the top-line growth and foreign exchange impact? - Management acknowledged that currency translation might be more negative than previously expected, indicating a potential negative impact of 2% instead of 1% [15][89] Question: How confident are you about constant currency sales growth in Q2? - Management indicated that Q2 would be a difficult comparison, but they expect to be close to flat [58][66] Question: What are the factors affecting gross margins? - Management noted inflation in ingredients and labor, along with foreign exchange impacts, as key factors affecting gross margins [17][91] Question: Can you elaborate on the growth in South Korea? - Management highlighted that South Korea showed good momentum, marking its best quarter in nearly two years, driven by improved customer acquisition and activation [50][96] Question: What is the outlook for the EMEA region? - Management attributed the return to growth in EMEA to strategic actions taken and expressed confidence in continued growth despite economic challenges [63][10]