DIRECT SELLING INDUSTRY ANALYSIS
For the month ending September 30, 2020
This month, we are again providing a significantly expanded analysis and data overview in an effort to continue to provide the direct selling industry, and other constituencies interested in the space, with timely and relevant financial content and analysis. We are proud to present this comprehensive model for those interested in the financial aspects of the direct selling industry.
SUMMARY & OUR TAKE
Tupperware and Nu Skin lead, Small Cap’s Take a Hit
September represented a generally volatile period for the markets as a whole and members of our direct selling tracking set were not immune to the action within the broader indices. Generally speaking, the larger capitalization stocks we are tracking were flat, to slightly down during the month, with a couple notable exceptions. Amongst small cap stocks, a number of recent leaders pulled back off of recent highs. As a whole, the Transformation Capital Direct Selling Index (TDSI) declined 4.43% over the course of September compared to a decline of 2.28% for the Dow Jones Industrial Average (DJIA). However, the TDSI remains up 44.17% since February 28, 2020, as compared to a gain of 9.34% for the Dow.
Tupperware Brands Corporation (NYSE: TUP) moved up to our large cap tracking set this month as the Company rose an additional 24% over the course of the period and now possesses a market capitalization of ~ $1 billion, which is the minimum requirement for inclusion in our large cap list. Tupperware now stands more than 600% above its February 2020 closing price based on positive trends across its business driven by new management and a pandemic oriented trend towards at home food preparation and storage. Elsewhere, Nu Skin Enterprises, Inc. (NYSE: NUS) advanced an additional 6% and now stands 107% above its pre-pandemic levels. Subsequent to the end of the month, after the market closed on October 1, Nu Skin announced revenue results for the third quarter of 2020 that were nearly $100 million ahead of the low end of the Company’s previously issued guidance range. As a result, the stock rallied approximately 10% on October 2 on trade nearly 3X average. Other interesting notes include Primerica, Inc. (NYSE: PRI), which our research indicates is significantly outperforming its insurance and financial services peers.
The smaller cap stocks amongst our tracking set showed some weakness over the course of the month, but much of that was within stocks that have advanced significantly over the course of the last several months. Natural Health Trends Corp (NASDAQ: NHTC) rose more than 20% between September 11 and September 14, on heavy trade, before settling into a gain of 8.25% for the period. Sharing Services Global Corporation (OTC: SHRG) fell 47% during the period, but remains 525% above its February 2020 closing price.
Looking Forward
September continued the consolidating action we have generally seen amongst our direct selling tracking set since August. We believe this consolidation is a prelude to an exceptionally strong end to what has proved to be a phenomenal year across the channel. As previously mentioned, the markets have been volatile of late, which can cause some fits and starts. The upcoming election and continued uncertainty surrounding the COVID-19 pandemic and related stimulus have all been contributing factors. However, the industry’s overall financial trends, as well as anecdotal evidence, remain strong.
We continue to believe that 2020 remains on track to surpass 2016’s record domestic direct selling revenue and our short to mid-term thesis remains unchanged. Our belief is that the industry will continue to perform well financially and outperform the major indices for the foreseeable future. However, the direct selling industry, as with all industries, is not immune to market driven trends, in either direction.
There continues to be a bullish sentiment surrounding the industry with more than 95% of analysts covering the industry maintaining a “buy” or “hold” rating on the stocks they cover. In addition, the industry continues to pass the eye test with flying colors when considering the private company data we are collecting, as well as the publicly reported data, such as the large revenue beat by NUS.
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