This round goes to Bill Ackman. Direct sales marketer Herbalife missed second quarter earnings estimates by two cents and the results are expected to batter the stock today. Excluding some items, Herbalife posted earnings of $1.55 a share, missing analysts’ estimates by 2 cents. The Los Angeles-based company also said yesterday that sales this year will grow by 8.5-10.5%, slower than the range of 10-12% it predicted in April.
The dimmer forecast follows an assault last week by Ackman, a hedge-fund manager who alleges that Herbalife is a pyramid scheme. Ackman, who has bet $1 billion against the company, made a more than three-hour presentation on July 22 purporting to show that the company is an Enron-style fraud. Investors brushed off his arguments, sending the stock up 25%in one day.
Yesterday, Herbalife Ltd. reported second quarter net sales of $1.3 billion, reflecting an increase of 7% compared to the same time period in 2013 on volume point growth of 5%. On a reported basis, second quarter 2014 net income of $119.5 million, or $1.31 per diluted share compares to $143.2 million, or $1.34 per diluted share for the same period in 2013. Interestingly, the company blamed the distraction from the World Cup soccer tournament in Brazil and a new method to qualify for discounts in the U.S. both contributed to slowing sales volume in the Americas. Net income also was depressed by currency changes, including devaluation of the Venezuelan bolivar, and higher than expected taxes.
"Herbalife has once again delivered strong results in sales and profitability while demonstrating our continued ability to enhance our earnings per share," said Michael Johnson, Herbalife's chairman and CEO. "Our performance is a testament to the enthusiasm our millions of consumers and members have for our products. Additionally, our independent members are successfully executing numerous growth strategies to further develop customer loyalty and encourage individuals across our network to lead healthier, nutritious lives. Our members are proud to be a part of a solution to global public health issues and we value the integral role they play in Herbalife's mission."