USANA's Rise Brand Expands with Costco Launch Amid Operational Challenges

What happened

USANA Health Sciences, through its acquired Rise Wellness brand, has launched Protein Pop Plus, a new carbonated clear protein beverage, at all Costco locations in the U.S. This expansion builds on the original Protein Pop line, aiming to capture growth in the ready-to-drink protein market and align with USANA's strategy to diversify beyond its shrinking direct-selling business. However, the launch occurs against a backdrop of severe operational issues, including a 14% year-over-year decline in direct-selling active customers and adjusted EBITDA margins collapsing to 6.4% in Q3 2025. While the Costco partnership could drive incremental sales, it is unlikely to immediately mitigate core profitability problems exacerbated by high SG&A costs and Brand Partner incentives. Thus, this move represents a tactical product innovation but does not address the structural challenges threatening USANA's turnaround.

Implication

The nationwide Costco distribution provides a significant retail platform that could enhance brand visibility and drive short-term revenue for USANA's Rise Wellness segment. However, given the company's persistent issues with high SG&A costs and declining direct-selling profitability, any sales gains may be offset by ongoing margin dilution, as seen in recent quarters. Investors should monitor whether this expansion contributes to stabilizing EBITDA margins above 10% and active customer counts, key metrics outlined in the investment thesis. Success in these areas could signal progress, but without evidence, the launch remains a minor positive amid broader operational risks. Therefore, while it underscores management's efforts to innovate, it does not justify a shift from the current 'WAIT' rating until financial improvements materialize.

Thesis delta

The investment thesis remains unchanged, centering on the need for clear evidence of direct-selling customer stabilization and EBITDA margin recovery above 10% to validate a turnaround. This product launch is a tactical step that does not materially alter the structural risks, such as margin dilution from Hiya or ongoing customer declines, and thus does not shift the core wait-and-see approach. However, if it leads to sustained revenue growth without further margin deterioration, it could support a more optimistic scenario, but such an outcome is speculative and not yet supported by data.