July 29, 2013 / 9:18 PM / 6 years ago

UPDATE 2-For Herbalife, investor feud turns into strong results

By Atossa Araxia Abrahamian

July 29(Reuters) - Nutritional products giant Herbalife said its better than-expected earnings and rosy 2013 outlook were driven by a fast-growing global distributor network and strong demand for its weight-loss shakes and supplements.

All the recent publicity over the company’s business model did not hurt, either, Herbalife President Des Walsh told Reuters.

“Despite all the noise on Wall Street, we saw a record number of 80,000 new distributors in the U.S. in the second quarter,” said Walsh.

“Now, more people who are aware of what’s happening have taken time to understand our business, and with that comes an acknowledgment of the legitimacy of our products,” Walsh said.

Herbalife, whose weight-loss and nutrition products are sold through a network of independent individuals all over the world, has spent much of 2013 caught in the crosshairs of two Wall Street titans.

In December, Bill Ackman, who heads Pershing Square Capital, made a public bet against $1 billion dollars worth of Herbalife stock and accused the company of being a “pyramid scheme.”

Activist investor Carl Icahn, on the other hand, stood by Herbalife and put two of his representatives on its board of directors.

Ackman’s early remarks caused the company’s shares to plummet to about $25 from $45 late in the year. But the stock recovered to hit 12-month highs of $62.23 last Tuesday and neared $64 in extended trading after the company announced its second-quarter results Monday.

If this surge continues, Ackman’s short position could become highly unfavorable. Ackman’s spokeswoman did not immediately comment on the results.

Herbalife’s second-quarter earnings point to a positive second half of 2013. The Los Angeles-based company raised its 2013 forecast for adjusted earnings per share to a range of $4.83 to $4.95 from $4.60 to $4.80 previously.

Net sales rose 18 percent to $1.2 billion, driven by strong demand for its products and a greater awareness from consumers “that they need to get their weight in check,” said Des Walsh.

“The obesity epidemic has always been with us, it just happens to be getting worse. What’s happening is that consumers are gaining a greater understanding of the impact of obesity on lives, longevity, and the economic costs of obesity.”

Herbalife beat analysts expectations for adjusted earnings per share, posting results of $1.41 compared to the anticipated $1.18, according to Thomson Reuters I/B/E/S.

The company’s net income for the second quarter was $143.2 million, or $1.34 per share, compared with $132.0 million, or $1.09 per share, a year earlier.

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