Inflation, pandemic lockdown hangovers in some markets and fallout from the war in Ukraine continue to depress sales and cut the earnings of most of the major network marketing companies selling natural products.

In the recent round of earnings reports, Herbalife Nutrition Ltd., Nu Skin Enterprises Inc. and USANA Health Sciences Inc. all reported significant sales declines year over year. But these companies’ typically healthy margins, combined with cost savings measures, enabled all three to still record profits.

Herbalife, Nu Skin and USANA are heavy hitters in the network marketing lineup. In the annual rankings of MLMs (multi-level marketers) based on revenues recorded by industry publication Direct Selling News, Los Angeles-based Herbalife ranked No. 3 globally with $5.8 billion in revenue in 2021, Nu Skin came in at No. 8 (Provo, Utah; $2.7 billion) and USANA ranked No. 14 (Salt Lake City, Utah; $1.2 billion).

Sales for Herbalife, USANA take drubbing

Herbalife recently reported fourth-quarter net sales of $1.2 billion, which was a 10.4% decline year over year. Full year net sales totaled $5.2 billion, which was also about a 10% decline, or a true 5% decline on a constant currency basis. 

“The company believes that macroeconomic inflationary pressures continued to challenge members’ operations and customer demand during the quarter,” Herbalife said in management commentary.

Because of a concerted cost-cutting effort, the company still managed to earn more than $3 a share.

Herbalife CEO Michael Johnson assumed the reins again at the end of October after previous CEO John Agwunobi was abruptly ousted. Part of the turnaround plan for Herbalife, Johnson said, is to better fit its product lineup to the modern market.

“We started out as a weight loss company. We shifted to a high-performance nutrition company,” Johnson said during an earnings call with analysts. “Our product today is one of the best meal replacements there is out there. But we have to get more in tune with what's going on out there in the sleep horizon and the anxiety horizon.”

Herbalife declined to provide guidance for the upcoming year.

Stock traders have been bearish on the company, sending its stock price plummeting more than 53% over the past year. That decline came in the context of an overall stock market that has fared better over the same time frame, with the Dow off by 1.4% over the past 12 months and the Nasdaq down 14%.

USANA, which generates a large chunk of its annual revenue from sales in China, listed inflation as its primary concern.

“Global inflationary pressure continued to negatively impact our materials and supply chain costs as well as our consumers’ purchasing behavior across several key markets,” said CEO Kevin Guest.

USANA’s fourth-quarter revenue fell by more than 14% to $228 million. For the full year, sales decreased to $999 million, off from $1.19 billion in 2021. 

Even with the plummeting sales, the company still earned almost $3.60 a share in the fourth quarter. USANA’s share price is off more than 30% in the past year.

Nu Skin’s cost cutting efforts recognized

Nu Skin, another company that derives a significant amount of revenue in China, largely attributed lockdown issues there for its revenue shortfall. Its fourth quarter sales fell more than 22% year over year to $522 million.

“The majority of the year-over-year decline in our business was due to strict Covid-related factors in China, which accounted for approximately $208 million of the revenue shortfall,” said CEO Ryan Napierski.

He also said the company is feeling the effects of the ongoing war in Ukraine, which has disrupted its business in Europe.

“We have discussed the impact in EMEA (Europe, Middle East and Africa) of the ongoing conflict, energy crisis and inflationary pressures on consumer spending and our business activities throughout the region. We know that without these external disruptions, our social commerce model works in EMEA,” he said.

Like Herbalife and USANA, however, Nu Skin’s cost-cutting efforts showed fruit. Financial services firm D.A. Davidson said Nu Skin showed a commitment to keep expenses in check during a tumultuous period.

“In dollars, G&A expense was -23% to $128M, much lower than our estimate of $145M,” the firm wrote in institutional equity research published Feb. 16.

Stock traders seem to have rewarded the company for attention to this detail. Nu Skin’s stock price is off by almost 20% over the past year, meaning it escaped some of the worst of the damage inflicted on the sector by a jittery market.

The statements by company officials in this news report were taken from transcripts of earnings calls posted on the site seekingalpha.com.