Herbalife Ltd. (NYSE:HLF) just reported earnings here are the highlights per sources close to the company – no doubt Mr. Ackman would disagree. Speaking of Ackman here is a statement we got from opponents of HLF before we get to the company’s comments.
From Illinois Herbalife (HLF) Campaign:
Illinois victims have lost millions to Herbalife’s misleading business practices and are concerned that nothing will change.
The FTC’s settlement requires Herbalife to fundamentally restructure its business, vindicating Illinois consumers that were defrauded by Herbalife. Despite the FTC-imposed historic fine of $200 million which also prohibits Herbalife from deceiving consumers to recruit distributors rather than sell actual products. There is real concern in the community that Herbalife will continue to operate unchanged, due to Herbalife’s CEO, Michael O. Johnson statements following the settlement, “The settlements are an acknowledgement that our business model is sound and underscore our confidence in our ability to move forward successfully.”
Illinois Attorney General, Lisa Madigan followed the FTC by acknowledging Herbalife’s fraudulent behavior and fined them an additional $3 million for Illinois residents scammed by Herbalife but did not impose any changes to their business model.
Over 200 Illinois victims have filed complaints and are available to speak with you on how they were scammed and feel that Herbalife will continue business as usual in the same local communities it has been defrauding for decades.
Details highlighting the positives below from a source close to HLF…
We are about to host our second quarter 2016 earnings conference call but wanted to get you the highlights before the call.
First and foremost, simply put it was a killer quarter. In fact, we sold more products in the second quarter of 2016 than in any quarter in Herbalife history.
Beyond this, a few facts:
- Total worldwide volume points grew 9% compared to 2Q’15, doubling the high end of our guidance range of 4.5% growth and representing the highest volume point quarter in Herbalife’s history. ~80% of markets grew volume and 4 of our 6 regions achieved record high volume.
- Reported net sales grew 3% in local currency and 10% in constant currency this quarter compared to 2Q’15. This maintains our YOY net sales growth for a second consecutive quarter.
- 2Q adjusted EPS of $1.29 per diluted share exceeded the high end of guidance of $1.20
This was a historic quarter for Herbalife’s performance with worldwide record-setting volume points and our continued YOY net sales growth. We have updated FY’16 guidance to reflect the confidence that we have for the remainder of the year as we continue this impressive momentum.
- Our worldwide volume point guidance for the year has been updated to a range of 4.5% to 7.5%, which reflects a full year increase of 130 million volume points partially due to the beat in 2Q’16.
- We have established FY’2016 GAAP EPS guidance of $2.30 to $2.60.
- Adjusted diluted EPS guidance for FY’16 has been raised to a range of $4.50 to $4.80 to reflect the better than expected 2Q’16 results, as well as the update to our FY’16 volume point guidance, partially offset by unfavorable currency movements.
- Net sales guidance for the year remains at a range of 1.5% to 4.5% growth.
The recently announced FTC settlement agreement will lead to certain enhancements that are good for our company.
- Segmenting our member base between customers and distributors is an initiative we have been contemplating for a while that will allow us to better tailor our products and services to meet the distinct needs of both groups.
- In addition, distributor compensation will be paid based on sales to customers along with an allowable level of personal consumption, and we are already in the process of rolling out a system to help track and submit sales receipts.
- This will provide us with valuable customer and sales data that we did not have access to previously and will help our distributors build even stronger businesses, enhancing their customer intelligence to a level greater than other consumer packaged goods companies.
- While we have 10 months to implement these changes, we are far along on many of them and expect to have the tools in place in advance of the deadline.
- We also reached a settlement agreement with the Illinois Attorney General and we are not aware of any other active investigations by any other state attorney general.
With the FTC settlement, our members’ enthusiasm and support is stronger than ever.
- Throughout the negotiation process, we discussed the details of the settlement with select member leaders under a confidentiality agreement, and their overwhelming support makes us confident in our members’ ability to successfully move forward with these changes and continue evolving this great organization.
- Many of our members around the globe are now asking if they too can have access to the valuable customer insight that the new tools provide, so we will likely roll out certain aspects of the agreement globally once we gain more insight from our experience in the U.S.
- We had the largest attendance for combined North American Extravaganzas in Herbalife history, with ~32,000 members attending our July events in Long Beach and Atlanta.
Herbalife is at a very exciting inflection point, with the biggest opportunity in our 36-year history to act on our mission to change the nutrition habits of the world, and we are continuing our growth trajectory.
- We have invested over $250 million in our Seed to Feed program over the past six years to ensure we can continue to support the growth in global demand.
- Our state-of-the-art Winston Salem, NC facility will support our growth and enable us to export U.S.-made products to 50+ countries.
- Our Nanjing, China facility was opened last month and will support our growth in China for the foreseeable future.
- To support this growth, we will be hiring ~175 talented employees domestically and 200+ worldwide.