Wellness products company Nature’s Sunshine Products (NASDAQ:NATR) reported results in line with analysts' expectations in Q1 CY2024, with revenue up 2.2% year on year to $111 million. The company's outlook for the full year was also close to analysts' estimates with revenue guided to $467.5 million at the midpoint. It made a non-GAAP profit of $0.12 per share, improving from its profit of $0.04 per share in the same quarter last year.
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Nature's Sunshine (NATR) Q1 CY2024 Highlights:
- Revenue: $111 million vs analyst estimates of $111.2 million (small miss)
- EPS (non-GAAP): $0.12 vs analyst expectations of $0.17 (29.4% miss)
- The company reconfirmed its revenue guidance for the full year of $467.5 million at the midpoint
- Gross Margin (GAAP): 71.2%, in line with the same quarter last year
- Free Cash Flow was -$1.50 million, down from $8.35 million in the previous quarter
- Market Capitalization: $359.4 million
Personal CareWhile personal care products products may seem more discretionary than food, consumers tend to maintain or even boost their spending on the category during tough times. This phenomenon is known as "the lipstick effect" by economists, which states that consumers still want some semblance of affordable luxuries like beauty and wellness when the economy is sputtering.
Consumer tastes are constantly changing, and personal care companies are currently responding to the public’s increased desire for ethically produced goods by featuring natural ingredients in their products.
Sales GrowthNature's Sunshine is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale.
As you can see below, the company's annualized revenue growth rate of 4.6% over the last three years was weak for a consumer staples business.
This quarter, Nature's Sunshine's revenue grew 2.2% year on year to $111 million, falling short of Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 6% over the next 12 months, an acceleration from this quarter.
Cash Is KingAlthough earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Nature's Sunshine burned through $1.50 million of cash in Q1, representing a negative 1.4% free cash flow margin. The company shifted to cash flow negative from cash flow positive in the same quarter last year, which caught our eye as we'd like consumer staples companies to have more consistent performance.
Over the last eight quarters, Nature's Sunshine has shown mediocre cash profitability, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin has averaged 3.7%, subpar for a consumer staples business. However, its margin has averaged year-on-year increases of 2.7 percentage points over the last 12 months. Continued momentum should improve its cash flow prospects.
Key Takeaways from Nature's Sunshine's Q1 Results The company's operating margin and EPS both missed analysts' expectations. Full year revenue guidance was maintained and is in line with expectations. Overall, this was a mediocre quarter for Nature's Sunshine. The company is down 1.4% on the results and currently trades at $18.75 per share.