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September 01, 2012

Financial News

Herbalife Breaks $1 Billion for Quarter

On its second quarter Investor Call, held July 31, Herbalife announced its record-breaking quarter of $1 billion and spoke of the expectation of strong increases over the back quarters of the year as well. This is truly good news as the company took some very unfair criticism over the past 60 days. Herbalife had already reported a strong first quarter, and the robust second quarter speaks to the strength of the business model and the relevance of both the Herbalife product line and business opportunity in what remain challenging times for many businesses.

On the call, Herbalife CEO Michael Johnson spoke of the record-breaking quarter as follows: “The broad strength of our business success continued throughout the second quarter with strong sales performance from each of our six regions, along with record earnings and strong cash flow.” He went on to say, “We believe the underlying drivers of our current business success—engaged distributors focused on globalizing daily consumption sales methods and products which are relevant for today’s global macro trends of obesity and an aging population—will continue to provide the catalyst for future growth.”

Company President Dez Walsh further stated that there are three primary reasons for Herbalife’s sustained success and growth: the expansion of the daily consumption business through nutrition clubs, the continued use of systemized training methods to support distributors and a city-by-city approach in which local leaders take responsibility for the area, working together on the opportunity and brand awareness. Walsh said, “One key characteristic of daily consumption business methods, whether nutrition clubs, weight-loss challenges or distributor-led fitness camps, is that the distributors and their consumers have much more frequent contact than is normal for traditional direct sellers.”

After walking through the quarter’s results by region, Walsh commended Herbalife’s distributors for the success of the quarter, saying, “This quarter’s results were a testament to their engagement, their resilience and their continued focus on creating and mentoring new customers for our products every day and over time, converting many of those product users to distributors who go on to do the same.”

All of the metrics in the Herbalife’s second quarter release are strong and could represent continued growth for the remaining months of the year. Achievements included an impressive gain in operating margins of 18.1 percent, representing an approximately 70 basis-point improvement over the prior year. Additionally, shareholders have benefited consistently in the share repurchase authorization, with Herbalife returning a total of approximately $1.9 billion to shareholders since 2007.

The highlights of Herbalife’s financial release include the following:

  • Second quarter net sales of $1 billion, an increase of 17.3 percent compared to the second quarter of 2011.
  • Second quarter EPS of $1.10 increased 25 percent compared to the prior year period EPS.
  • Raising FY ’12 EPS guidance to a range of $3.88 to $3.98.
  • Board of directors approved a 30 cents per share quarterly dividend.
  • Board of directors approved a new $1 billion share repurchase authorization.
  • Company announces a $500 million increase in its credit facility.