Stonegate Capital Partners Updates Coverage on Nu Skin Enterprises Amid Revenue Decline and Strategic Shifts

Stonegate Capital Partners has updated its coverage on Nu Skin Enterprises Inc. (NYSE: NUS), following the company's second-quarter fiscal 2026 results. The report reveals a mixed quarter with revenue falling short of expectations, though adjusted earnings met estimates. Nu Skin reported revenue of $320.1 million, compared to Stonegate's estimate of $345.2 million. Adjusted net income and adjusted EPS came in at $10.0 million and $0.20, respectively, aligning with the adjusted EPS estimate but slightly below the net income projection of $10.3 million. GAAP EPS was a loss of $(5.14), primarily due to a $78.9 million non-cash goodwill impairment and a $167.5 million deferred-tax valuation allowance, both excluded from adjusted results.

Operationally, Core Nu Skin gross margin improved by 20 basis points year-over-year to 77.7%, but consolidated gross margin declined 60 basis points to 68.2%, and adjusted operating margin fell 190 basis points to 6.1%. Revenue for Nu Skin and Rhyz segments declined 15.5% and 25.0% year-over-year, respectively. Management reduced its full-year 2026 revenue guidance to $1.28 billion to $1.35 billion, down from the previous range of $1.35 billion to $1.50 billion. Adjusted EPS guidance was also lowered to $0.70 to $0.90, from $0.80 to $1.20. Additionally, the launch in India has been delayed to the first half of 2027 from the end of 2026, as the company refines local sourcing, logistics, technology integration, and its affiliate model.

Stonegate notes that the revised outlook reflects a lower near-term setup, but identifies several drivers that could improve performance into 2027. Prysm iO remains the central longer-term growth initiative, with more than 39,000 devices placed and 2.5 million scans completed. The company targets 50,000 to 60,000 devices by year-end. Stonegate increasingly views Prysm iO as a sales-force productivity tool, with AI-enabled assessments, recommendations, and 90-day wellness plans expected to help leaders deepen customer engagement, improve conversion, and broaden monetization across beauty and wellness.

Sales-force trends showed early signs of stabilization. Sales leaders were down 9% year-over-year, compared to a 13% decline in the first quarter, and essentially flat quarter-over-quarter. Mainland China sales leaders increased 2% year-over-year. Although recruiting remains below levels required for sustainable growth, Prysm iO training, compensation changes, leadership development initiatives, and the East-West operating model provide several potential drivers for improved productivity and profitability next year.

This update from Stonegate Capital Partners comes as Nu Skin navigates a challenging environment, with revenue declines and lowered guidance. However, the company's strategic focus on Prysm iO and sales-force stabilization could position it for a rebound in 2027. Investors and industry watchers will be closely monitoring these developments as Nu Skin works to execute its turnaround plan.