All eyes on Nu Skin as it announces its preliminary Q4 results

06-Feb-2014 - Last updated on 05-Feb-2014 at 17:07 GMT

With an investigation currently under way into its operation in China, direct sales player Nu Skin announces preliminary quarterly results that will not yet account for an anticipated downturn.

The company said that its estimated revenue for the fourth quarter was $1.075 billion, a figure that is likely to be impacted by negative currency translation at 4%.

The figure shows that income has almost doubled since the same period last year, when Q4 results showed revenue of $588.2 million, which in itself was a 19 percent improvement over the same period in 2012.

Is this the end of the company's current growth spurt?

Much of these gains have been made in the China market, where the company’s direct sales policy has garnered it significant success, helping it to push total group sales in the country beyond the 20% mark.

But with an investigation currently under way into the company’s operations in China by government authorities, investors have continued to move away from the company, resulting in a significant plunge in its share price.

The China authorities instigated the Nu Skin investigation following a report in the China newspaper People’s Daily last week that the company has been operating an illegal pyramid scheme.

Were China employees 'brainwashed'?

According to Nu Skin the most recent China government trading license was issued in July of 2013, which stipulated that it could legally trade in 19 of the country’s total of 32 provinces.

The report stated that sales trainees were ‘brainwashed’ into selling the products, while the company is currently listing 104 products for sale in the country, which is 20 more than the government license to sell currently allows.

Nu Skin responded to the accusations in the article, claiming that it contained inaccuracies and exaggerations that were not a reflection of how it conducts business in the country.

Regulators investigations to focus on allegations of illegal practises

The regulators’ investigation will focus on the allegations raised in the newspaper report, which sent the company’s share prices into free fall, after the news report first broke at the beginning of January.

After the reports about the investigation first circulated, the company’s share value dipped below $80 per share in trading on the New York Stock Exchange, down from over $130 a share before the China news report first broke.

Share prices do seem to have bottomed out though, and currently are still trading at around $79 a share.