Los Angeles nutritional products company Herbalife Ltd. is responding to criticism about its business model by changing the way it classifies its customers. From now on, those who buy Herbalife health and nutrition products for personal use will be called “members” instead of “distributors,” Michael O. Johnson, the company's chief executive officer, said during a conference call with analysts.
The change comes eight months after hedge fund manager Bill Ackman called Herbalife a “pyramid scheme,” noting that most of its distributors lose money. Last year, Ackman’s Pershing Square Capital Management took a $1-billion short position against Herbalife stock.
Pershing Square issued another attack of Herbalife on Tuesday, releasing a list of questions about the company’s positive second quarter earnings report. Among other things, the hedge fund questioned why Herbalife listed the $15 million it has spent this year defending itself against Ackman’s attack as a one-time expense “given that the company has been sued numerous times for being a pyramid scheme.”
Herbalife shares reached a new 52-week high Tuesday morning, one day after the company reported record sales and profit for the second quarter of the year.
“Herbalife’s business is stronger than it’s ever been and the operating results announced yesterday are the best in the company’s history,” Johnson said.