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Nu Skin Under Investigation In China For Pyramid-Scheme Allegations

This article was originally published in The Rose Sheet

Executive Summary

Chinese officials are investigating allegations that Nu Skin has perpetrated “illegal multi-level marketing activities” in the country. Nu Skin is conducting its own review, having already identified policy infractions among its sales representatives during the firm’s recent period of rapid growth in China, and is putting its recruitment efforts on hold to cooperate with regulatory authorities and improve its training programs.

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Nu Skin’s direct-selling model in China, the legality of which some investors have questioned, was not cited in fines levied on the company totaling $540,000. Firm says it “is not aware of any other material enforcement investigations currently pending” in the country, which accounted for nearly half of Nu Skin’s fiscal 2013 fourth-quarter sales.

Nu Skin Projects 20%-24% Growth In Q1 Despite China Regulatory Probe

Analysts have faith in Nu Skin’s strategy, and future prospects, as it works with Chinese officials to resolve an investigation into its business practices in China. While the firm’s recent explosive growth is expected to fall off substantially in the first quarter of fiscal 2014 – to a more modest 20% to 24% – Nu Skin is confident that the steps it is taking in China “will make our long-term success more likely.”

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