Nu Skin looks to Chinese expansion

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US personal care company Nu Skin's net income suffered from a
conference payment in Q4, but the company was happy with the large
revenue it brought in during the period.

The company​ reported $306.3 million in revenue for the fourth quarter, which represented an 11 per cent year-over-year increase.

This was the largest revenue quarter in the company's history, according to Nu Skin, though it pointed out that net income and earnings per share were impacted by a $5 million bill from a distributor convention in Japan.

"We're pleased with our fourth quarter results, particularly in our key geographies,"​ said Truman Hunt, the company's chief executive officer. He added that new distributor compensation incentives improved results in Japan. Meanwhile, revenue in mainland China was up 48 per cent compared to prior-year results and remained steady on a sequential basis, and in the US the company posted "solid"​ year-over-year revenue growth.

Hunt said that the company was optimistic about its growth opportunities in 2005 as it awaits the release of new direct selling regulations in China in the next few months, and begins to add new stores and infrastructure.

"For the first quarter, we anticipate revenue to be in the $275.0 to $280.0 million range, with earnings per share in the $0.21 to $0.23 range. For 2005, we are increasing our forecasted revenue to $1.20 to $1.22 billion for the year, with earnings per share of $1.15 to $1.22,"​ said Hunt.

As reported back in November, China's government is set to free up the market for direct sales in the country, a move that is likely to allow the direct sale of cosmetics by international companies such as Avon, Nu Skin and Oriflame.

Under the conditions of China's entry to the World Trade Organisation, one of the main stipulations is that the country opens up the retail sector to allow the entry of foreign players.

As well as the law to liberalise the regulations on direct sales, the authorities are also freeing up regulations allowing foreign multinational retailers to set up in China.

With the new regulations promising to allow greater freedom to businesses already established in China, as well as offering greater access to new businesses wishing to enter the market, leading international directs sales cosmetic businesses can now look forward to better prospects.

The sheer size of the China populace combined with the fact that economic prosperity is continuing to develop at phenomenal rates gives many industries reason to believe that there are significant opportunities. For cosmetics companies in particular, huge opportunities are in the offing. Currently the market for cosmetics is valued at $4 billion, but with growth rates continuing to skyrocket, some industry experts believe that this figure will have grown ten times by the year 2010.

This, combined with the fact that the vast majority of China's population remains outside the primary industrial and economic zones, and consequently out of reach of the major retail centres, gives many industry experts reason to believe that direct cosmetics sales could be a major growth industry.

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