Nu Skin appears to be putting Chinese pyramid-selling accusations behind it. The company has already been fined US$540,000 following a Chinese government probe, though the probe extended right across the direct selling industry on the Chinese mainland. Nu Skin consistently denied it operated a pyramid selling scheme. The news that the Utah based company is getting distance on Chinese worries has fired its share price, with shares valued at $86.59 before going to press (they fell almost 40% at the start of the year when the Chinese probe went public). The company said it was resuming Chinese operations immediately, recruiting Chinese sales people from the start of May.
“China is an important marketplace for Nu Skin and we are committed to operating in full compliance with China’s direct selling regulations to promote long- term success,” Dan Chard, President of Global Sales and Operations said in a statement. Door-to-door selling, which gave several US companies a huge new Chinese market, was banned towards the end of the 1990s. But the Chinese ban – which also included basic network marketing activity – was lifted in 2005.
Nearly 30% of Nu Skin revenues came from China in 2013. On 6 May, the company announced record Q1 results with revenue of $671.1m, a 24% improvement over the prior-year period. Revenue was negatively impacted 4% by foreign currency fluctuations, while earnings per share for the quarter were $1.05, representing a 17% year-on-year improvement. “Our results are particularly encouraging given the business disruption we experienced in China during the first quarter, as well as currency headwinds we faced in many markets,” said President and CEO Truman Hunt. “With respect to China, our team took aggressive, proactive steps to address media and regulatory concerns in a timely manner. While these first-quarter events in China will have a negative impact on 2014 results, we are now focused on generating sustainable, long-term growth.”
