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Usana May Reveal A Litany Of Problems
- Possible further weakening of North American sales, which distributor growth has essentially flatlined.
- China and Hong Kong results will determine Usana's fate, where the former have drastically offset the latter. China's media have also publicly criticized Usana's questionable practices.
- Q2 results may reveal the intent of their $200 MM buyback program that was authorized in Q1, while insiders have continued to sell their stock and exercise their options.
Usana Sugarcoats Its Weak Results And Downplays A Huge Buyback Authorization
- Q1 results reveal flat distributors growth over Q4, the state of associate confidence and heightened regulatory scrutiny.
- Lower guidance, weaker margins coupled with higher diluted shares does not bode well for shareholder value.
- Usana authorized share repurchases from $13M to a whopping $200M (about 20% of market cap.) Could the Chairman be preparing a selloff or an exit with his 47.3% ownership?
How Usana Compares With Herbalife's Pyramid Scheme Allegations
- Usana operates similarly to Herbalife where commodity-like products are sold at premiums through a heavy emphasis on recruiting rather than traditional means of advertising and R&D.
- Confirmation that the FTC (and now allegedly the DOJ/FBI) has launched an investigation on Herbalife overshadows Usana’s seemingly strong financials.
- China relented to direct selling companies in 2001 under the pressure of the US. New rules by the FTC could would spillover to China.
- Hong Kong sales are suspiciously declining at an alarming rate, while offset by growth in China where MLMs are banned.
- Evidence that supplements have any long-term benefits for preventing cancer and cardiovascular disease (CVD) remains inconclusive by the US Preventative Service Task Force (USPSTF).
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