Health and wellness products company USANA Health Sciences (NYSE:USNA) fell short of the market’s revenue expectations in Q3 CY2024, with sales falling 6.2% year on year to $200.2 million. The company’s full-year revenue guidance of $850 million at the midpoint also came in 1.4% below analysts’ estimates. Its GAAP profit of $0.56 per share was 15.5% above analysts’ consensus estimates.

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“Third quarter operating results reflected continued top line headwinds across many of our key markets,” said Jim Brown, President and Chief Executive Officer.

Company Overview

Going to market with a direct selling model rather than through traditional retailers, USANA Health Sciences (NYSE:USNA) manufactures and sells nutritional, personal care, and skincare products.

Personal Care

While 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 Growth

Reviewing a company’s long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years.

USANA is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefitting from economies of scale.

As you can see below, USANA’s demand was weak over the last three years. Its sales fell by 11.2% annually, showing demand was weak. This is a poor baseline for our analysis.

This quarter, USANA missed Wall Street’s estimates and reported a rather uninspiring 6.2% year-on-year revenue decline, generating $200.2 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 1.1% over the next 12 months, an acceleration versus the last three years. Although this projection indicates the market believes its newer products will spur better performance, it is still below average for the sector.

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Cash Is King

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

USANA has shown impressive cash profitability, driven by its attractive business model that gives it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 7.1% over the last two years, better than the broader consumer staples sector.

Key Takeaways from USANA’s Q3 Results

It was good to see USANA beat analysts’ EPS expectations this quarter. On the other hand, its revenue unfortunately missed analysts’ expectations and it lowered its full-year revenue guidance. Overall, this was a weaker quarter. The stock traded up 1.5% to $35 immediately after reporting.

So do we think USANA is an attractive buy at the current price?We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy.We cover that in our actionable full research report which you can read here, it’s free.