USANA HEALTH SCIENCES INC

Overview

Sales performance in the third quarter was modestly below our expectations as the operating environment in many of our markets remained challenging. Consumer spending in many of our markets remained under pressure due to macroeconomic factors, which created difficulty for our Associates to build momentum attracting new customers, particularly in our largest market, mainland China.

Notwithstanding the challenging environment, we continued to execute upon our long-term strategic initiatives. Our commercial team, which was reorganized earlier this year, has been executing on these initiatives to enhance the overall value proposition of our business to our customers and we are beginning to see results in several of these areas.

We continued our engagement efforts with our sales leaders during the quarter, highlighted by our Americas & Europe Convention in Las Vegas, Nevada. Training, development and recognition were key focus areas at this event, with an emphasis on actionable initiatives to help our sales leaders grow their businesses. Additionally, we previewed improved digital tools aimed at enhancing the overall selling and shopping experience. Feedback has been positive and leaders are actively adopting these new initiatives.

At our Americas & Europe convention, we launched two new products: Celavive Resurfacing Serum and Whey Protein Isolate. These product launches are illustrative of the early stages of our product innovation strategy and Associate-first approach, which includes increasing the cadence of new and upgraded high-quality, relevant, and premium products. In addition to benefits anticipated from product innovation, the new commercial team is also driving shorter timelines from formulation to commercialization as well as exploring enhanced selling strategies to support our Associate-first approach.

For the fourth quarter, we expect the operating environment in many of our markets to remain challenging. We plan to modestly increase promotional activity to help offset these market pressures and to drive sales momentum. Although we are monitoring the recently-announced stimulus initiatives in China, we do not expect them to have a meaningful positive impact on our fourth quarter operating results.

We remain focused on executing the five key initiatives that underpin our long-term strategy. These include (i) leveraging performance from our restructured commercial team, (ii) expanding product innovation and commercialization, (iii) increasing our efforts to engage our sales leaders with an Associate-first approach, (iv) growing our India market, and (v) evaluating more business development activities. These initiatives are a meaningful multi-year endeavor and are focused on making USANA’s overall value proposition more compelling, ultimately driving long-term performance and stakeholder value creation.