USANA Health Sciences(USNA) - 2019 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a challenging market environment in China during Q2 2019, with lower-than-expected contributions from promotions and incentives [7][8] - The U.S. market was roughly flat from Q1 to Q2, indicating a lack of significant growth [19] Business Line Data and Key Metrics Changes - Promotions in China, which historically generated meaningful sales growth, had a significantly lower impact this quarter due to ongoing consumer sentiment issues [8][10] - The company plans to introduce new products and promotions in the second half of 2019 to stimulate growth across various markets [12][13] Market Data and Key Metrics Changes - The Americas and Europe experienced broad-based weakness, with local currency revenues down double digits this year [35] - Korea showed strong performance with a 30% increase in sales during the quarter, indicating a successful market strategy that may be replicated in other regions [42] Company Strategy and Development Direction - The company remains committed to long-term growth in China despite current challenges, with plans to enhance promotional activities and introduce new products [10][15] - Adjustments to the compensation plan have been made to better align with market conditions and consumer behavior [39] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing hesitancy in the consumer base in China due to negative media coverage affecting the health products and direct selling industry [29][30] - The company is optimistic about future growth potential, particularly in Korea, where a younger demographic is showing strong engagement [43] Other Important Information - The company is preparing for its Annual International Convention, where new incentives and products will be introduced [14] - Management emphasized the importance of maintaining a conservative approach to product claims and focusing on scientific evidence to counter negative press [56][62] Q&A Session Summary Question: Broader weakness in markets - Management noted that the weakness was more broad-based than anticipated, with specific challenges in Southeast Asia, the Americas, and Europe [18] Question: Share repurchase guidance - Management confirmed that no share repurchase activity had occurred yet, but the inclusion in the S&P 600 small cap index has increased trading volumes [21][23] Question: Promotions in China - Promotions that worked in the past did not yield the same results this time due to consumer hesitancy linked to media scrutiny [28][30] Question: Non-China market performance - Management indicated that the direct selling industry is facing headwinds, and changes in consumer interaction with companies are impacting sales [36][38] Question: CapEx expectations - The company plans for a significant increase in CapEx this year, primarily driven by food processing initiatives [41] Question: Product portfolio requests - Management acknowledged receiving various requests for new products but emphasized the need to be cautious and not pursue every trend [64][66]