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Herbalife says its earnings soared in fourth quarter

February 19, 2013|By Stuart Pfeifer
(Mark Boster / Los Angeles…)

Herbalife Ltd. reported that sales of its weight-loss and nutrition products increased significantly in the fourth quarter, even as a hedge fund manager was preparing a massive campaign to short its stock.

The Los Angeles company said it earned $1.05 a share, at the top of the company's January estimated range $1.02 to $1.05, and a 22% increase from the same period a year earlier.

Net sales in the fourth quarter increased 20% from one year ago to $1.1 billion, the company said.

Herbalife also increased its estimated earnings for 2013 from $4.45 to $4.65 a share, but said it was excluding $10 million to $20 million it will spend in "legal and advisory services" as it fights recent allegations that it is operating a fraudulent pyramid scheme.

Herbalife has been one of the hottest stories on Wall Street since December, when billionaire hedge fund manager Bill Ackman accused the company of operating a pyramid scheme and said he had taken a $1-billion short against the company's shares.

Ackman said most of the company's independent distributors lose money or break even while a lucky few who got into the company early get rich from commissions for bringing others into the business.

Herbalife denied the allegations, saying all of the commissions it pays are related to sales, not recruiting. The company said it sells nutritious products through a team of independent distributors who build one-on-one relationships with consumers, coaching them about weight loss while selling products to help them achieve their goals.

Its meal-replacement shake mixes, vitamins and other supplements are available only through independent sales people, not at retail stores.

Ackman's December disclosure initially caused Herbalife shares to plummet, but they slowly recovered after other hedge fund managers snapped up the beaten-down shares. Most notably, investor Carl Icahn disclosed last week he had purchased nearly 13% of Herbalife's shares and planned to inquire about bringing the company private, a move that would probably drive up Herbalife's stock price.

Herbalife shares were up less than 1% in after-hours trading. They closed at $39.74, up $1, or 2.6%.


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