Herbalife stock is in trouble again today. Shares plunged as much as 12% during regular trading today after remaining fairly stable for more than half of last month. So what’s all the hubbub about today? It may have something to do with the suggestion that the controversial company’s sales are slipping.

Making deductions from Herbalife’s web traffic

A post on Seeking Alpha by short-seller Quoth the Raven suggests that Herbalife’s sales may again disappoint in the fourth quarter. The author makes this suggestion based on traffic data for the multi-level marketing company’s sales portal MyHerbalife.com.

Distributors use the website to purchase products from the company. Of course this isn’t the only place Herbalife products can be purchased, but the Seeking Alpha contributor believes the amount of traffic the site gets provides some important insight into how Herbalife’s sales are going.

Herbalife

Plunging traffic numbers for Herbalife’s site

The writer describes traffic to the sight as “falling off a cliff.” Alexa and Compete are two well-respected firms that measure web traffic, and since May 2012, MyHerbalife.com’s Alexa ranking has plummeted from 6,000+ to 16,000+. As a result, the short-seller thinks Herbalife will disappoint in its fourth quarter sales numbers. He states that mostly U.S.-based Herbalife distributors buy their products from MyHerbalife.com, as indicated by the website itself.

He points to charts from both Compete and Alexa which show how much traffic to the website in question has fallen. He describes the charts as providing a “horrifyingly accurate look” into Herbalife’s current performance.

Herbalife’s tipping point

It seems clear from the charts that May 2012 was the tipping point for Herbalife, at least in terms of web traffic. And of course if fewer distributors are visiting the wholesale site, it means sales should be falling—unless of course fewer distributors are purchasing more Herbalife product because web traffic looks at the number of monthly unique visitors.

May 2012 was an important month for Herbalife because that’s when David Einhorn asked what he calls his “infamously pesky” question. It wasn’t until December of the same year, however, that Herbalife really came under attack when activist investor Bill Ackman took aim and announced his $1 billion bet that the company’s shares would plummet. And he hasn’t let up since.

Will Herbalife disappoint again?

Herbalife is scheduled to release its next earnings report on or around Feb. 18. The nutritional supplements company disappointed big time in its last earnings report, posting sales of $1.26 billion, which came up short of Wall Street’s consensus estimate of $1.32 billion. In last year’s fourth quarter, Herbalife actually beat sales estimates, coming in at $1.27 billion compared to the estimate of $1.22 billion.

Quoth the Raven thinks this year’s fourth quarter sales will end up being a disappointment just like the third quarter sales were. He notes that the combination of disappointing sales with continued headwinds from foreign exchange rates is likely a recipe for disaster.