Herbalife Beats on Earnings, Boosts 2016 Guidance

Herbalife Ltd. (HLF—NYSE) boosted its guidance for the year in its latest earnings report, released late Wednesday and watched closely by investors following the nutrition company’s settlement with the Federal Trade Commission.

Results exceeded Wall Street estimates for the quarter ended June 30, just weeks before Herbalife announced a settlement with the FTC. The long-awaited deal concluded a U.S. probe into the company’s business practices that had stretched on for more than two years, following accusations by hedge fund manager Bill Ackman that Herbalife rewards distributors for recruiting new members rather than sales of its shakes and supplements. Ackman has backed his claims with large bets against the company’s stock.

In its complaint, the commission did not accuse Herbalife of being a pyramid scheme, and the company is able to continue its U.S. operations, with some new restrictions. Herbalife agreed to pay a $200 million judgment and implement various policy and procedural changes, including distinguishing between those who sign up to sell products and those who only wish to purchase products at a discount.

Additionally, to compensate distributors at current levels, at least 80 percent of Herbalife’s product sales must be to legitimate end-users, rather than for the distributor’s personal consumption.

Taking into account the impact of these changes, management expects full-year adjusted earnings of $4.50 to $4.80 a share, up from May guidance of $4.40 to $4.75.

The company recorded a second-quarter loss of $22.9 million, or 28 cents a share, including a $203 million charge related to regulatory settlements. Excluding items, earnings were $1.29 a share, up 4 percent from a year ago. Analysts polled by Thomson Reuters had predicted $1.21 a share.

Overall sales rose 3 percent to $1.20 billion, in line with the $1.19 billion expected by analysts.

The company is developing new tools and apps to help distributors implement agreed-to changes within the 10 months provided by the FTC. During a call with investors, Chairman and CEO Michael Johnson said Herbalife will “likely roll out” many of the changes globally, once it has studied affects in the U.S.


Herbalife Settles with FTC

Herbalife Ltd. and the Federal Trade Commission have reached a long-awaited settlement agreement resolving an investigation of the Los Angeles-based nutrition company that began more than two years ago. The deal, which requires Herbalife to make specific changes to its U.S. operations and pay $200 million, will be studied closely by the wider direct selling channel.

Herbalife also reached a settlement with the Illinois Attorney General, resulting in the company agreeing to pay $3 million to the office, separate from the FTC agreement.

Company executives and investors responded positively to the settlements, with shares in the company trading above $66 at midday, an increase of more than 10 percent.

“The settlements are an acknowledgment that our business model is sound and underscore our confidence in our ability to move forward successfully, otherwise we would not have agreed to the terms,” Herbalife Chairman and CEO Michael O. Johnson said in a statement announcing the settlement. The statement went on to say that the company believes many of the allegations made by the FTC are factually incorrect but that the settlement is in the company’s best interest in light of the financial cost and distraction of protracted litigation. Herbalife said management can now focus all of its energies on continuing to build the business.

The FTC commenced an investigation into Herbalife 26 months ago, following accusations by hedge fund manager Bill Ackman that the company is defrauding customers. Ackman launched a campaign against the supplement seller in December 2012, backing his claims with a $1 billion short position in Herbalife stock.

As part of the deal, the company will pay a $200 million judgment and has agreed to various business procedures and policy enhancements. The $200 million figure is what Herbalife had floated in its first-quarter financial report as the company’s best estimate of a settlement. The FTC said this is the largest such consumer redress settlement obtained by the FTC and that it will provide information at a later date about how it will make those funds available for consumers.

The business procedures and policy enhancements included in the settlement pertain largely to Herbalife’s compensation model and marketing claims, which the FTC criticized in its complaint against the company. The settlement stipulates that the company must distinguish between individuals looking to build an Herbalife business and those who sign up simply to purchase products at a discount—a practice Herbalife management, in fact, implemented several years ago. Discount buyers are not eligible to sell product or earn rewards. The company is also required to ensure that at least two-thirds of rewards paid out to distributors are based on verified retail sales, rather than distributors’ personal consumption. And, in order to pay compensation to distributors at current levels, at least 80 percent of Herbalife’s product sales must be comprised of sales to legitimate end-users. If that threshold is not met, rewards to distributors must be reduced.

The company also agreed to:

  • require distributors to complete their first year, as well as a …


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Herbalife to Reprise Role as Official Nutrition Sponsor of Vietnam Sports

In a deal with the Vietnam Sports Administration, Herbalife Ltd. is extending its sponsorship of the country’s athletes, including 2016 Olympics contenders bound for Rio de Janeiro.

The five-year deal names Herbalife the Official Nutrition Sponsor of Vietnam Sports through 2021. The global nutrition company, which derives about 23 percent of its revenue from the Asia Pacific region, initially stepped into the role ahead of the London 2012 Olympics. For the first time in Rio, Herbalife will sponsor the country’s Paralympic athletes as well as Olympic competitors.

“Herbalife has always been a strong believer in the power of sport as it exemplifies the healthy, active lifestyle we promote,” said Stephen Conchie, Vice President and General Manager of Herbalife Southeast Asia. “With our renewed commitment as Vietnam Sports’ Official Nutrition Sponsor, we are looking to deepen our relationship further and help athletes and coaches maximize the benefits of sports nutrition to achieve maximum performance.”

The partnership puts Herbalife products, sports nutrition consulting and training at the disposal of Vietnamese athletes taking part in international competitions, ranging from the Southeast Asian Games to the 2020 Olympics. Around the world, Herbalife sponsors more than 190 top athletes, teams and sporting events.

Direct Selling News Unveils Industry’s Top Companies in Seventh Annual DSN Global 100

In recognition of those companies that lead the way in offering an unparalleled opportunity for individuals to start their own businesses, Direct Selling News today unveiled its seventh annual DSN Global 100, an exclusive ranking of the top revenue-generating companies in direct selling.

The DSN Global 100 is a collective effort to show the impact and potential of the $182.8 billion direct selling channel. Unveiled online at DirectSellingNews.com and featured in the June issue of Direct Selling News magazine, this year’s Global 100 companies hail from 17 countries and represent aggregate revenue of more than $82 billion.

The DSN Global 100 tells a story of impressive growth in 2015, exhibited by the fact that 20 companies surpassed $1 billion in annual revenue,” said Lauren Lawley Head, Publisher and Editor in Chief of Direct Selling News. “These exceptional companies represent not only corporate staff, but millions of lives impacted by the products and opportunity they offer.”

Many direct selling companies had an incredible year of growth and success in 2015. For the first time, 20 companies each reported annual revenue of $1 billion or more. For the fourth consecutive year, Ada, Michigan-based Amway claimed the No. 1 rank, with $9.5 billion in revenue. Avon, Herbalife, Vorwerk and Infinitus rounded out the top five on this year’s list.Best Places To Work 2017

DSN also presented a regional subset of the Global 100: The North America 50, which was first introduced in 2015. As its name implies, the North America 50 ranks the most significant players in one of the world’s largest direct selling markets.

The annual event celebrating the Global 100 took place on April 7, 2015, at the Omni Hotel in downtown Dallas. During the dinner and awards ceremony, DSN also presented its Bravo Awards for excellence. Wellness and lifestyle brand Le-Vel received the Bravo Growth Award for its extraordinary 254 percent year-over-year growth, amounting to revenue of $349 million in 2015. Magnus Brännström, CEO and President of Switzerland-based Oriflame Cosmetics and keynote speaker for the evening, received the Bravo Leadership Award for leading his company to annual revenue of $1.35 billion amid a period of great economic and geopolitical turmoil in many of its top markets.

DSN created the Global 100 list to acknowledge the successes of individual direct selling companies and provide a clear picture of the magnitude of the industry. In its seventh year of undertaking this project, DSN continues its commitment to create a fair ranking that will showcase a transparent industry, thus providing credibility and consumer confidence as well as research support for those seeking information on direct selling companies.

Herbalife Quarterly Results Come in ahead of Expectations

Quarterly results were better than projected at Herbalife Ltd. (HLF—NYSE), the nutrition company reported after the close on Thursday.

The shake and supplement seller, which has spent three years fending off attacks on its business model by hedge fund manager Bill Ackman, posted $1.1 billion in revenue for fourth quarter 2015 and adjusted earnings of $1.19 a share, beating consensus estimates of $1.06 billion and 94 cents a share. Reported earnings fell to $84.5 million, or 98 cents a share, from $103.3 million, or $1.21 a share, a year ago.

Herbalife China continued to drive growth, as quarterly revenue increased 24 percent to $220.4 million. Sales in North America remained flat, while the remainder of Asia Pacific and EMEA dipped 6 percent and 4 percent, respectively. The company reported a 21 percent decline in South and Central America and a 14 percent decline in Mexico.

For the full year, revenue totaled $4.5 billion, down 9.9 percent from 2014. Excluding the impact of currency fluctuations, revenue rose 4.7 percent. Earnings were $3.97 a share on income of $339 million, compared to $309 million, or $3.40 a share, in 2014.

Chairman and CEO Michael O. Johnson said Herbalife in 2015 completed an overhaul of its marketing plan to strengthen the business in the long term. “We successfully navigated the associated short-term challenges, believing that we were making the right changes at the right time, and despite ongoing currency and macroeconomic challenges, we finished the year returning to growth.”

Facing sustained currency headwinds, Herbalife lowered its first-quarter guidance to adjusted EPS of 97 cents to $1.07, undercutting the average estimate of $1.09 by analysts. For the full year, management expects adjusted earnings in the range of $4.05 to $4.50 a share.

Former HHS Official Joins Herbalife as Chief Health and Nutrition Officer

Herbalife Ltd. has tapped a former U.S. Department of Health and Human Services (HHS) official, Dr. John Agwunobi, to serve as Chief Health and Nutrition Officer.

From 2005 to 2007, Agwunobi oversaw the nation’s disease prevention and health promotion programs as the department’s Assistant Secretary of Health. As such, he headed up the Centers for Disease Control, National Institutes of Health, and the Food and Drug Administration, among other HHS offices.

Agwunobi also brings extensive private sector experience, having served as Senior Vice President and President of Health and Wellness for Walmart in the U.S., providing insights on health reform, public health advocacy and employee wellness. During his tenure at the retail giant, annual revenue increased from $25 billion to $30 billion. He also sits on the board of a number of nonprofit and for-profit enterprises, including the U.S. African Development Foundation (USADF) and Magellan Health Services.

“We are proud to welcome Dr. Agwunobi to our Herbalife nutrition team,” Chairman and CEO Michael O. Johnson said in a statement. “As we continue to invest in accomplished leaders, we further strengthen our mission of providing health and nutrition education and training to our members and their customers around the world.”

Herbalife’s nutrition philosophy and nutrition and product education will come within Agwunobi’s purview as Chief Health and Nutrition Officer. He will lead the Herbalife Nutrition Institute, Nutrition Advisory Board and Dietetic Advisory Board. Agwunobi also is tasked with working alongside the company’s 34 Ph.D.s and 250 staff scientists to integrate nutrition science and member training into the product development process.

Herbalife Adds Filipino Doctor to Nutrition Advisory Board

The newest addition to Herbalife’s Nutrition Advisory Board reflects the company’s growing interest in the Asia Pacific region, which accounted for 20 percent of third-quarter revenue.

Herbalife has increased the board’s membership to 30 with the appointment of Dr. Francis Gregory Samonte, an expert in pediatric neurology and the first Filipino member of the board. Currently based in Manila, Philippines, Samonte studied at De La Salle University College of Medicine, Johns Hopkins University and Harvard Medical School. For his past work in the Department of Pediatrics at the University of Louisville, Kentucky, Samonte was a recipient of the Chairman’s Achievement Award.

The Nutrition Advisory Board helps to educate and train Herbalife independent members on the principles of healthy living. One of the company’s key educational initiatives is the Herbalife Asia Pacific Wellness Tour, which includes stops in 15 countries across the region. Various board members join company executives and researchers at each stop to host sessions, open to the general public, on the components of nutrition and physical activity.

David Heber, M.D., Ph.D., Founding Director of the Center for Human Nutrition at the University of California, Los Angeles, is Chair of the Nutrition Advisory Board. Among the company’s other third-party advisors are Dr. Lou Ignarro, a 1998 Nobel laureate recognized in the category of Physiology or Medicine for his discovery of nitric oxide’s health benefits; and Dr. Gary Small, a specialist in brain health and aging whose numerous honors include the Senior Investigator Award from the American Association for Geriatric Psychiatry.

This Week: Herbalife’s Attorney Warns off Ackman, J.Hilburn CEO Talks Holiday Style

Catch up on this week’s industry chatter with these click-worthy links:

  • Fox Business Network’s Charlie Gasparino set Herbalife’s stock price aflutter on Tuesday with news of a letter from Herbalife’s legal counsel to OTG Research Group, the outside research firm of Bill Ackman’s Pershing Square Capital Management. The letter calls on the firm to cease and desist what it terms “improper conduct” on behalf of Herbalife short seller Ackman, including contacting current and former Herbalife employees and offering compensation for confidential information on the company.
  • After having her first child, model Erin Joy Henry found herself mentally and physically depleted, with less time to meet the demands of her career. That’s when she began using health products recommended by a friend in direct selling, despite her skepticism about the business model. Writing for the Huffington Post, Henry shared her evolution from skeptic to direct sales entrepreneur and holistic nutrition counselor, helping other people improve their health and finances in what she calls a “dream career.”
  • Also at HuffPost, J.Hilburn’s Veeral Rathod has some tips on how to be the best-dressed man at any holiday party. Drawing on his expertise as Co-Founder and CEO of the custom menswear company, Rathod lays out a few rules of thumb to help his fellow men celebrate the holiday season in style.
  • Two top Avon executives will exit the company at year-end, according to a report by The Wall Street Journal. The beauty brand’s strategy chief and supply chain head, both brought on by CEO Sheri McCoy in 2013, were named by an anonymous source (paywall). News of the decision, reportedly communicated within the company last month, comes as activist investors including Barington Capital Management LP call for restructuring and new leadership within the company.
  • Scentsy is lighting up the night with an elaborate holiday display at the company’s Meridian, Idaho headquarters. To get the job done, the home fragrance seller tapped a local husband-and-wife team, who set out in October to string 20 miles of lights on hundreds of trees across the corporate campus.

Herbalife, LA Galaxy Help Los Angeles Families Celebrate Thanksgiving

Photo: Herbalife Executive Vice President Rob Levy hands out groceries as the Herbalife Family Foundation and the LA Galaxy Foundation partner with A Place Called Home to provide Thanksgiving meals.

As jersey sponsor of the LA Galaxy, Herbalife has partnered with the Major League Soccer club both on and off the field. The Herbalife Family Foundation (HFF) and the LA Galaxy Foundation recently teamed up with A Place Called Home, a nonprofit youth center in Los Angeles, to help local families celebrate Thanksgiving.

On the day before Thanksgiving, HFF officials joined two former stars of the LA Galaxy, Cobi Jones and five-time MLS Cup Winner Todd Dunivant, as well as LA Galaxy President Chris Klein to distribute food and turkeys to more than 1,200 families. The organizations also partnered with A Place Called Home last year to serve Thanksgiving dinner to 1,000-plus families.

A Place Called Home provides educational programs, counseling and mentorship to children and teens in the South Central Los Angeles area, with the help of more than 1,000 volunteers each year. The LA Galaxy Foundation also has announced plans to hold a holiday season toy drive in support of the youth center. Club players and staff will distribute the toys at a Place Called Home on Saturday, Dec. 19.

Herbalife Misses Sales Expectations, Raises Outlook

Herbalife Ltd. yielded a profit of $93.6 million in the third quarter, the nutrition company said Tuesday.

The shake and supplement seller reported net income of $1.09 per share, compared to 13 cents per share a year ago. Excluding one-time costs, earnings were $1.28 per share, exceeding management’s guidance of $1.00 to $1.10 and the Zacks Concensus Estimate of $1.07.

Expenses incurred in the quarter included $4.7 million related to regulatory inquiries and $2.8 million spent responding to attacks on the company’s business model.

Third-quarter revenue was $1.1 billion, down 12 percent on a reported basis and up 5 percent in constant currency. Analysts had expected revenue of $1.15 billion. The most significant revenue growth came from China, where constant currency sales spiked 27 percent. The company’s weakest performance came from the Asia Pacific region outside China, which reported a 16 percent revenue decline.

The company provided fourth-quarter earnings guidance of 85 cents to 95 cents per share on an adjusted basis, reflecting an unfavorable currency impact of about 27 cents per share. Excluding currency impact, adjusted earnings are expected to fall within the range of $1.12 to $1.22 per share.

For the full year, the company now expects earnings in the range of $4.65 to $4.75, up from its previous guidance of $4.50 to $4.70.

Shares in Herbalife, up 53 percent this year, fell 2.7 percent in after-market trading on Tuesday.