September 21, 2012 / 3:42 PM / 7 years ago

Nu Skin to expand direct selling ops, distribution in China

Sept 21 (Reuters) - Personal-care products maker Nu Skin Enterprises Inc outlined plans to expand the direct selling side of its China business, which had come under scrutiny following recent allegations by a short seller.

The company said it was recently issued direct selling licenses in several provinces in China and was working to expand the number of licenses in additional provinces.

Citron Research, run by California-based investor and notable short-seller Andrew Left, had published a report in August alleging that the company was operating an illegal multi-level marketing scheme in China.

Nu Skin said on Friday that it plans to triple the number of stores and sales support centers in the region by 2017.

Nu Skin has been fast developing in China, now its largest revenue contributor, and other emerging markets. Sales in Greater China more than doubled to $199.7 million in its last reported quarter, representing a third of total sales.

It also plans to add independent marketers, who will sell products from their own place of business, to its existing multi-channel business model.

Nu Skin’s existing model in China employs contractual sales people who sell products from stores, and direct sellers who sell products away from stores.

The company said it is consulting with government authorities to develop the additional distribution channel in a manner that is consistent with what the direct selling industry offers in China.

Stanford University sent a “cease and desist” letter to Nu Skin last month asking the company to stop using a university researcher’s name in its advertising, adding new scrutiny to the skin product maker’s business claims and practices.

The company’s shares, which have tumbled 21 percent since Citron’s allegations first surfaced, were down slightly at $38.87 on Friday on the New York Stock Exchange.

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