Nature's Sunshine Products Q2 Earnings Call Highlights

Nature's Sunshine Products NASDAQ: NATR reported second-quarter net sales of $117 million, its strongest second quarter in company history, as digital growth in North America and continued momentum across much of Asia-Pacific and Europe supported results. Sales increased 2% from the prior-year quarter and rose 4% on a constant-currency basis. Chief Executive Officer Ken Romanzi said growth was driven by customer acquisition, expanded digital capabilities, autoship subscription adoption and consultant growth. He also said cost controls and productivity efforts contributed to further gross-margin expansion.

Asia-Pacific sales increased 1% year over year to $53 million, or 5% on a constant-currency basis. Chief Accounting Officer Jon Lanoy said Japan delivered 50% growth, while China sales declined 20% following operational issues. China had previously grown more than 30% over the past year, he said. Lanoy characterized the China issues as short term and said management expects to address them during the second half of 2026. Excluding China, sales through the company's SynerG Eagle system in Asia-Pacific rose 11% from a year earlier.

North American sales grew 3% to $36 million in the second quarter, bringing first-half growth in the region to 6%. The company's digital business expanded 26%, with new customers also up 26%. Autoship represented 36% of orders placed through the company's website. Social commerce sales increased 177% year over year, according to Lanoy, while subscription autoship accounted for 60% of social-commerce revenue. He said the company views autoship participation as an indicator of future growth and profitability because the lifetime value of subscription customers is more than three times that of other customers. Romanzi said the company's core North American direct-selling business has been soft for several years, even as digital channels continue to expand. Nature's Sunshine plans to reinvigorate its U.S. direct-selling program in early 2027 through new products, a new compensation plan and incentives. European sales increased 4% to $26.7 million, helped by 12% growth in Eastern Europe. Lanoy said improved availability of key products supported the region despite continuing unrest there.

Gross margin rose nearly 200 basis points to 73.7%, the highest level in more than four years. Lanoy attributed the improvement to renegotiated logistics contracts, manufacturing efficiencies, sourcing improvements and more disciplined pricing. The company expects gross margin to average in the low- to mid-73% range for the remainder of 2026. Volume incentives represented 30.6% of net sales, compared with 29.9% a year earlier, primarily because of market mix changes. Selling, general and administrative expenses increased t...