BOSTON Feb 19 Nutrition and weight loss
products company Herbalife Ltd lowered its forecast
range for 2014 sales and again defended itself on Wednesday
against allegations by billionaire investor William Ackman that
its business is a fraud.
Herbalife, embroiled in a dispute with Ackman who over the
past 14 months has accused the company of being a pyramid
scheme, discussed earnings projections and its response to a
U.S. lawmaker's inquiry into its business with analysts on a
Sales are expected to grow between 7.5 percent and 9.5
percent this year, in part because of strong business in China.
. Those numbers are lower than the company had
forecast in October, when it reported third quarter results, and
said 2014 sales would grow between 9 percent and 11 percent.
Investors said that may have added to pressure on
Herbalife's stock price, which closed down nearly 4 percent on
Wednesday at $66.18 per share.
Overall the outlook remained robust, however, with the
company raising its earnings forecasts for the year to $5.85 to
$6.05 a share, from $5.45 to $5.65.
On the call, Herbalife chief executive Michael Johnson
described Ackman's short bet against Herbalife as "a reckless
bet placed by a Wall Street gambler." Ackman first accused
Herbalife publicly of running a pyramid scheme in December 2012.
A pyramid scheme is an unsustainable business that typically
makes most of its money by recruiting distributors rather than
selling products to real customers.
The company says it operates a legitimate multi level
marketing business and Johnson struck back both at Ackman on the
call and in a letter to Senator Edward Markey, a Massachusetts
Democrat with an interest in consumer protection. Markey started
asking questions about the business in January.
Ackman has lost hundreds of millions on his $1.16 billion
bet against Herbalife as the company's stock price has climbed
67 percent in the last 12 months.
Executives on the call told analysts that the company was
obeying all regulations in its business in China, and met with
Markey's staff late last month.
In the letter to Markey, dated Feb. 18, Johnson said the
company's compensation is driven by product sales, not
recruitment. A copy of the letter was seen by Reuters.
Johnson also wrote that he wants to "assure (Markey) in the
strongest possible terms, as we assured your staff, that
Herbalife does not 'target' members of minority or low
Civil rights groups have said the company preys on
minorities with seductive advertising and promises to get rich
by selling Herbalife products.
Executives told analysts on the call that Herbalife was
poised to gain from a global obesity epidemic by offering
products designed for weight loss. They said the bulk of
customers buy the product for their own use and only a small
number try to make a business out of selling products to others.
In the letter, Johnson said Herbalife wants its members to
live a "healthier lifestyle" and give them a choice to "take
advantage of the business opportunity that a multilevel
marketing business model, like Amway, Avon or Tupperware, can
When Markey made his questions public, the company's stock
price dropped 15 percent. Markey set a deadline of Feb. 28 for
the company to respond to his questions.
News last month that Chinese officials were probing
allegations that NuSkin another multi-level-marketing
firm, has been exaggerating its influence and creditworthiness
in brochures, had weighed on Herbalife shares earlier this year.