USANA My Smart Foods Let Customers Control Formulations

USANA Health Sciences Inc. tries micro-management as its latest growth driver with the My Smart Foods line that allows customers to formulate products according to their own needs and tastes.

The weight loss and nutritional products direct seller also counts on a macro move to drive sales as it extends its business to Indonesia on Nov. 16, USANA announced on Nov. 3 in its fiscal 2015 third-quarter earnings release.

Indonesia has potential to be a substantial sales driver as “the fourth most populous country with the fifth-fastest growing economy” said co-CEO Kevin Guest in a Nov. 4 briefing with analysts.

He also noted USANA product users differ not only by age and gender, but also in where they live around the world.

“They'll have different and various needs, and so the My Smart Foods is a way for them to customize or personalize their products based upon their individual needs, for instance how much protein they may need in their diet,” Guest said.

Preferences in flavors also vary widely, he said.

“In Hong Kong, the flavor preference is much different than it is here in the United States. We've been able to centralize a formula as a product base, have more of a centralized worldwide global formula, and then we have flavor packs that go with it. So it helps from an economies-of-scale perspective, but also helps customize by region on a global business that is supplied out of Salt Lake City on the personalization side.”

Guest noted that USANA already offers “a very similar program” for customers to develop a personal nutritional regimen, the True Health online app launched in 2013.

The app asks consumers for information on their exercise habits and other elements of their lifestyles, their diet and their health and fitness goals; recommends changes they should make to reach their goals; and suggests USANA products that will help reach those goals (Also see "USANA Sees “Ultimate” Personalization In “True Health” Online Tool" - Pink Sheet, 17 Mar, 2014.).

“Our strategy of personalization is also an area where we are differentiating ourselves from the rest of the pack,” Guest said, adding, “we are seeing the strategies that we put in place over the last few years starting to move the needle.”

31.3% Earnings Growth

The Salt Lake City-based firm’s net earnings for the July-September period increased 31.3% to $25.6m driven by 21.5% growth in net sales to $233.3 million and helped by improved gross margins and lower relative selling, general and administrative expenses.

Earnings per diluted share for the quarter increased 30.6% to $1.92.

Sales in the Asia-Pacific region increased 29.1% to $168.2m, despite an $11.8m loss to foreign currency exchange, with Southeast Asia-Pacific incurring 65% of the total impact of currency fluctuations. Sales increased 45.5% in Greater China, 3.3% in the Southeast Asia-Pacific and 16.3% in the North Asia region.

USANA said its Americas/Europe region sales increased 5.5% to $65.1m, with $6.5m lost to currency exchange.

It raised its guidance for net sales to between $915m and $920m from previous range of $900m to $920m, and its earnings per share guidance to between $7.25 and $7.35 from previous outlook of $6.90 to $7.20.

Market analysts are impressed with USANA’s performance and expect the firm will further boost its share value by returning to re-purchasing shares after pausing the practice during the quarter.

“It would be difficult to find a more impressive growth stock than USANA, Pivotal Research Groupo analyst Timothy Raney said in a Nov. 4 note. “We have been cautious about the persistence and stability of growth, clearly were too cautious,” he added.

USANA executives told Ramey and other analysts who asked whether share re-purchases remain an option.

Ramey noted USANA reported $174m in cash, has no debt and has $61 million authorized under its share repurchase program.

“Last year the company was aggressive, buying in 14% of shares outstanding while maintaining a debt-free balance sheet. We suspect they will be more aggressive in the 4Q,” he said.