* Second half profit, sales forecast misses estimates
* 2nd-qtr sales, profit hurt by weak China sales
* To restate 1st-qtr results
* China's potential not lost-CEO
* Shares fall 25 pct to 17-month low
(Adds details from conference call, updates shares)
By Devika Krishna Kumar
Aug 6 Nu Skin Enterprises Inc, a
direct-seller of skincare and nutritional products, forecast
sales for the second half of the year that fell well short of
analysts' expectations as it struggles to overcome problems in
China, its biggest market.
Nu Skin's shares slumped as much as 25 percent to a 17-month
low of $43.50 after the company also reported a much
steeper-than-expected fall in sales and profit for the second
quarter ended June 30.
The company has had a rough year, starting in January when
it was forced to suspend recruitment drives in China.
Two months later it was fined $540,000 by a Chinese
regulator for illegal sales and misleading local consumers about
the potential benefits of its products.
The company resumed recruitments in early May, but said it
was not back to full strength in China. Greater China, which
includes Taiwan and Hong Kong, accounts for more than a third of
the company's total revenue.
Still, Chief Executive Truman Hunt struck a positive note.
"We haven't seen anything in China that leads us to believe
that the market's potential is spoiled or lost," Hunt said on a
Short-sellers and activist investors have accused direct
sellers such as Nu Skin, Herbalife Ltd and Usana Health
Sciences Inc of running pyramid schemes, where members
make more money recruiting new members than through sales.
About 3.9 percent of Nu Skin's stock was held by short
sellers as of July 15, according to Nasdaq data, much lower than
the 6.1 percent as of the end of January when the company's
problems in China surfaced.
Up to Tuesday's close, Nu Skin's shares had slumped 58
percent this year.
Nu Skin said first-quarter profit would be reduced by $9.4
million after a restatement to include charges of $28 million
related to a tax rebate in China and inflation in Venezuela.
The company, which introduces new products using
limited-time offers, said the response to such offers in China
was lighter than expected in June, but picked up in July.
Nu Skin's sales in Greater China fell 12 percent in the
second quarter ended June. Total revenue fell 3 percent to $650
million, missing the average analyst average estimate.
The company's forecast for the second half of the year
implied a revenue decline of 34 percent at the midpoint,
JPMorgan analysts said in a note.
That was much steeper than the 11 percent decline Wall
Street was expecting and the brokerage's recently revised
estimate of a 25 percent fall.
Nu Skin's profit forecast for the third and fourth quarters
was also well short the average analyst estimate.
Profit plunged 73 percent in second quarter, hurt by a 40
percent jump in costs. Excluding items, the company earned $1.13
per share, well short of the average estimate of $1.27.
(Editing by Saumyadeb Chakrabarty and Savio D'Souza)