USNA Q3 Deep Dive: Compensation Plan Changes and Cost Cuts Drive Strategic Pivot

Health and wellness products company USANA Health Sciences (NYSE:USNA) met Wall Street’s revenue expectations in Q3 CY2025, with sales up 6.7% year on year to $213.7 million. The company’s outlook for the full year was close to analysts’ estimates with revenue guided to $920 million at the midpoint. Its non-GAAP loss of $0.15 per share was in line with analysts’ consensus estimates.

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StockStory’s Take

USANA's third quarter results were met with a negative market reaction, as investors responded to a significant reduction in full-year guidance and ongoing operational pressures. Management attributed the quarter’s performance to the global launch of an enhanced compensation plan and noted initial softness in sales and Brand Partner productivity as the field adapted to these changes. CEO Jim Brown described the transition period as challenging, stating, “We didn’t have the best quarter or it didn’t meet our expectations,” but emphasized encouraging signs of improved engagement and activity in recent weeks. The company also highlighted increased inventory levels tied to new product launches and supply chain adjustments.

Looking ahead, USANA’s forward guidance is shaped by its focus on driving growth through continued rollout of the enhanced compensation plan, targeted cost reductions, and integration of its recent acquisitions. Management plans to prioritize incentives and promotions to support Brand Partners and is implementing a global cost reduction process, including workforce rightsizing. CFO Doug Hekking acknowledged the early stage of these initiatives, noting that details on anticipated cost savings will be provided next quarter. The company’s strategy also includes leveraging in-house manufacturing and operational expertise to improve efficiency and profitability across its direct selling and direct-to-consumer businesses.

Key Insights from Management’s Remarks

Management sees the enhanced compensation plan and progress in venture businesses as central to both the quarter’s results and the company’s evolving commercial strategy.

• Compensation plan overhaul: The new global compensation framework prioritizes simplicity, early earning potential, and performance-based rewards for Brand Partners, aiming to attract and retain a younger demographic. Early signs suggest the plan is resonating, with increased engagement and business activity, particularly in mature markets like the United States.

• Initial sales softness: The rollout of the new compensation plan led to a temporary slowdown as Brand Partners digested the changes, with activity picking up only after the company’s Global Convention in late August. Management noted that this adjustment period lasted longer than anticipated but recent trends indicate potential for recovery.

• Inventory and supply chain adjustments: Elevated inventories resulted from new product launches and relocation efforts to mitigate tariffs. The company is also beginning targeted in-house production for its venture businesses, which is expected to improve margins and control over inventory.

• Hiya integration and DTC momentum: Hiya, USANA’s direct-to-consumer vitamins subsidiary, faced challenges in top-line growth this quarter due to shifting digital marketing algorithms but delivered strong year-to-date sales. Operational integration, including transitioning logistics partners and moving toward in-house manufacturing, is anticipated to enhance efficiency and margins next year.

• Cost reduction and restructuring: A global cost reduction initiative, including workforce rightsizing, has been initiated to improve agility and support prioritized growth areas. Management expects a one-time charge in the fourth quarter, with more details on savings to be provided in the next update.

Drivers of Future Performance

USANA’s outlook hinges on driving productivity from its compensation plan changes, operational efficiencies, and ongoing diversification into direct-to-consumer channels.

• Enhanced compensation plan execution: The company believes sustained engagement and improved early earnings opportunities for Brand Partners will drive higher recruitment and productivity, supporting sales growth across core markets. Management expects continued incentives and promotions to reinforce adoption of the new plan into next year.

• Operational efficiency and cost reductions: USANA is targeting process streamlining, supply chain optimization, and workforce rightsizing to offset margin pressures. The transition to in-house manufacturing for subsidiaries like Hiya and Rise Bar is projected to yield cost savings and improve profitability, with further details on annualized benefits anticipated next quarter.

• Diversification and M&A opportunities: The company is committed to broadening its portfolio with additional direct-to-consumer and omni-channel businesses. Management indicated that future capital allocation will prioritize expanding existing ventures and pursuing strategic acquisitions, aiming to reduce reliance on the traditional direct selling channel.

Catalysts in Upcoming Quarters

Looking forward, the StockStory team will be closely monitoring (1) sustained productivity and engagement among Brand Partners as the compensation plan matures, (2) progress in executing cost reduction and workforce rightsizing initiatives for improved margins, and (3) the operational and financial impact of integrating in-house manufacturing for Hiya and Rise Bar. Additional attention will be given to the pace of new product launches and any developments in the company’s M&A pipeline.

USANA currently trades at $20.59, down from $20.93 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members).

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