On August 6, Nature's Sunshine Products (NASDAQ:NATR) held its second-quarter earnings call, and the numbers told two very different stories at once. Net sales hit $117 million, the strongest second quarter in the company's history. Gross margin climbed to 73.7%, the highest level in over four years.
Yet management also cut its full-year sales and profit guidance, pointing to currency swings and a sudden reversal in China. The tension between a record quarter and a lowered forecast defines where this stock stands today. North America digital sales grew 26% year-over-year in the quarter, and new customers acquired through the digital channel rose by the same amount.
Autoship subscriptions made up 36% of website orders, while the newer social commerce channel jumped 177%, with autoship accounting for 60% of that revenue. Management noted that subscription customers carry a lifetime value more than three times higher than other buyers. The digital business overall is on pace to reach $50 million in sales by the end of 2026, just five years after it launched.
Growth outside China held up too. Japan sales jumped 50%, and the company's Synergy Eagle system, which operates in Japan, Taiwan and Korea, grew sales 11% with China excluded from the Asia Pacific total. Europe sales rose 4% to $26.7 million.
The company also strengthened its leadership bench, naming Ruth Perkins, a finance veteran of Ford, Estee Lauder and PepsiCo, as CFO effective September 1, and Janine Weber, who helped build Rodan + Fields into a $1 billion skin care brand, as President of North America effective August 10. China sales fell 20% in the quarter, a sharp reversal from growth that had exceeded 30% over the prior year, which management attributed to unspecified operational issues. That slowdown, combined with currency headwinds, pushed the company to lower its full-year net sales guidance to a range of $490 million to $500 million, down from $500 million to $515 million, and to cut its EBITDA guidance to $48 million to $52 million from $50 million to $54 million.
SG&A expenses rose to $44.9 million from $43.7 million a year earlier, and management expects that figure to run between $45 million and $47 million for the rest of the year as growth investments ramp up. Volume incentives climbed to 30.6% of net sales from 29.9%. The company also spent part of the quarter without a permanent CFO after Shane Jones departed in June, and executives acknowledged that the North American direct selling business has been under pressure for some time, with a planned overhaul not arriving until early 2027. 21 hedge funds held NATR shares in the most recent quarter, up from 19 the quarter before, a modest rise in interest.
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