What impact does the sales decrease have on the company's gross margin and operating expenses?

Impact on Gross Margin

With net sales slipping from $27.7 MM to $25.7 MM (‑7.4%), Mannatech’s cost‑of‑goods‑sold (COGS) will now represent a larger share of a smaller revenue base unless the company can proportionally trim production or sourcing costs. Because many of the direct‑material and manufacturing expenses are relatively fixed in the short term, the drop in sales is likely to compress the gross‑margin percentage. A lower gross margin erodes the buffer for profitability and puts pressure on earnings per share, which is a key driver for the stock’s valuation.

Impact on Operating Expenses

Operating expenses—primarily selling, general & administrative (SG&A) and R&D—are also largely fixed in the near term. As sales decline, these expenses will constitute a higher percentage of revenue, raising the operating‑expense ratio and further squeezing operating margin. Unless Mannatech accelerates cost‑containment measures (e.g., headcount reductions, marketing spend cuts, or renegotiated vendor contracts), the expense drag will magnify the downside from the sales shortfall.

Trading Implications

The combined effect of a narrowing gross margin and a rising expense ratio signals margin compression and a likely dip in net income for the quarter. This fundamentals‑driven weakness is already reflected in the negative sentiment (‑35) and could translate into continued price weakness. Traders may consider a short‑position or defensive stance until the company demonstrates concrete cost‑control actions or a rebound in top‑line growth. Conversely, if Mannatech announces aggressive expense‑reduction initiatives or shows early signs of margin stabilization, a long‑bias could be justified on a bounce‑back rally. Monitoring upcoming earnings calls for margin‑management updates will be critical for positioning.