Herbalife Slumps Most Since November on Earnings Forecast Miss

(Bloomberg) -- Herbalife Ltd., the seller of weight-loss shakes and nutritional supplements, fell the most in almost four months after forecasting first-quarter profit that fell far short of analysts’ estimates.

Earnings in the current quarter will be 75 cents to 95 cents a share, excluding some items, the Los Angeles-based company said Thursday, citing the negative impact of expected currency fluctuations. Analysts estimated $1.31, on average.

Herbalife reached a settlement with the Federal Trade Commission in July that required the company to overhaul its U.S. operations and pay a $200 million fine -- money that was used to refund 350,000 distributors. That investigation was initiated in part by short seller Bill Ackman, who made a $1 billion bet against Herbalife in 2012 and accused the company of being an illegal pyramid scheme. Herbalife has repeatedly denied those allegations.

Shares of Herbalife fell as much as 6.2 percent to $55.72 on Friday in New York, the biggest intraday decline since Nov. 2. They had climbed 23 percent this year through Thursday.

The current quarter will be challenging partly because of the early timing of Chinese New Year, Chief Financial Officer John DeSimone said on a conference call late Thursday. Sales in China, Herbalife’s third-largest market, fell in the second half of 2016, as local leaders transitioned to a social-media model from a club business, Herbalife President Des Walsh said on the call. Also, while a switch from smaller to larger clubs seemed like a good idea in terms of lowering operating costs, the company saw customer counts decline in those clubs, he said. Now it’s reverting to the “neighborhood” model that had worked well in the past, he said.

Sales fell 4.9 percent to $1.05 billion last quarter, matching the average of two analysts’ estimates. Profit of $1 a share topped three analysts’ 97-cent average projection.

To contact the reporter on this story: Molly Smith in New York at msmith604@bloomberg.net.

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Lisa Wolfson