Herbalife Nutrition Announces That in the Month of May 90% of Sales in the United States Were Documented Purchases by Consumers, Far in Excess of the 80% Threshold Called for in its Agreement With the U.S. Federal Trade Commission
Sunday, June 04, 2017 11:15:00 PM ET --Company Collected More Than Three Million Receipted Retail Transactions in the United States in May
--Company Provides Updated Guidance
Premier global nutrition company, Herbalife (HLF ), today announced
that due to the dedication and diligence of its distributors, in May, 90
percent of United States sales were documented purchases by consumers,
comprised of more than three million receipted retail transactions.
These results far exceed the 80 percent threshold called for in the
Companys agreement with the U.S. Federal Trade Commission. The Company
also announced that approximately 400,000 customers have converted or
signed up as preferred members in the U.S. since the program began in
October 2016.
"These figures should put an end to any questions regarding demand for
our nutrition products and the strength of our go-to-market business
model," said Richard P. Goudis, CEO, Herbalife Nutrition.
In the past ten months, Herbalife Nutrition created industry-leading
technology and tools in partnership with its distributors to help them
efficiently document retail sales. The flexibility of the tools, built
on a robust scalable infrastructure, has allowed the Company to track
retail sales of products to end-users thereby allowing the Company to
collect new marketing data, such as pricing, buying preferences and
consumer purchase trends. This critical information, most of which is
new to the Company, will help create significant competitive advantages
as Herbalife Nutrition leverages data analytics to provide enhanced,
industry-leading personalized support to its distributors and customers.
While the 80 percent threshold is an annual test, the Company believes
this one-time off-cycle announcement is important to share with
distributors in order to recognize their significant role in achieving
this May 2017 milestone. The Company notes, however, these results are
based on the Companys records and are subject to the review of the
independent compliance auditor.
Guidance Update
The Companys distributors have successfully utilized the full array of
new tools and processes necessary to document retail sales transactions.
Yet, as is typical with any change, the new technology and processes
have taken time for distributors to learn, then teach and implement in
their organizations. This acute focus on learning has impacted current
period sales as distributors adapted to these new protocols. The Company
expects as these new processes become even more efficient and more
routine, the current sales trend will be a short-lived cycle followed by
a sequential acceleration of growth.
The Company further believes that this situation is similar to what the
Company has experienced in markets when changes of this magnitude have
been introduced. In fact, other protocol changes made by the Company in
2014 and 2015 had a similar short-term sales impact but then contributed
to record performance in 2016.
As a result of current sales trends during the transition in the US,
combined with softer trends in Mexico, the Company is updating its
volume, net sales and EPS guidance for the second quarter and the full
year 2017. The updated guidance reflects an increase in diluted EPS and
adjusted diluted EPS but a decrease in volume and net sales.
Finally, the Company believes that the second quarter of 2017 will be
the most challenging quarter of the year from a comparative perspective
given that last years second quarter volume was the largest in the
Companys history.
The updated guidance is reflected in the following chart:
Three Months Ending Twelve Months Ending
June 30, 2017 December 31, 2017
------------------------------------- -------------------------------------
Low High Low High
------- ------- ------- -------
Volume Point Change vs 2016 (8.0%) (4.0%) (1.0%) 2.0%
Net Sales Change vs 2016 (6.0%) (2.0%) 0.5% 3.5%
Diluted EPS (a) $0.75 $0.95 $3.30 $3.70
Adjusted(b) Diluted EPS $0.95 $1.15 $4.10 $4.50
(a) Excludes any potential impact of ongoing tax effects from
exercise of equity awards and share repurchases that took place
after April 30, 2017.
(b) Adjusted diluted EPS, for the purposes of 2017 guidance,
excludes the impact of expenses relating to challenges to the
companys business model, the impact of non-cash interest costs
associated with the companys convertible notes, FTC settlement
implementation, and expenses related to regulatory inquiries.
The following is a reconciliation of diluted earnings per share
guidance, presented in accordance with U.S. generally accepted
accounting principles, to adjusted diluted earnings per share
guidance for certain items.
--------------------------------------------------------------------- -------------------- -------------------- -------------------- --------------------
Three Months Ending Twelve Months Ending
June 30, 2017 December 31, 2017
-------------------- -------------------- --------------------
Diluted EPS Guidance (1) $0.75 - $0.95 $3.30 - $3.70
Expenses incurred responding to challenges to the companys business 0.02 0.08
model (2)
Non-cash interest expense and amortization of non-cash issuance costs 0.14 0.55
(3)
FTC Consent Order Implementation (4) (5) 0.04 0.12
Expenses related to Regulatory inquiries (6) 0.03 0.11
Income tax adjustments for above items (7) (0.02) (0.06)
-------------------- -------------------- --------------------
Adjusted Diluted EPS Guidance (8) $0.95 - $1.15 $4.10 - $4.50
==================== ==================== ====================
--------------------------------------------------------------------- -------------------- -------------------- -------------------- --------------------
(1) Excludes any potential impact of ongoing tax effects
from exercise of equity awards and share repurchases that took place
after April 30, 2017.
(2) Excludes tax impact of $0.5 million and $2.0 million
for the three months ending June 30, 2017 and the twelve months
ending December 31, 2017, respectively.
(3) Relates to non-cash expense on our convertible notes
and prepaid forward share repurchase contract.
(4) Excludes tax impact of $1.0 million and $3.0 million
for the three months ending June 30, 2017 and the twelve months
ending December 31, 2017, respectively.
(5) Includes $3.0 million of product discounts related to
preferred member conversions for the twelve months ending December
31, 2017.
(6) Excludes tax impact of $0.8 million and $2.8 million
for the three months ending June 30, 2017 and the twelve months
ending December 31, 2017, respectively.
(7) Aggregates the individual tax impacts of each item as
described in greater detail in footnotes 2, 4 and 6 above.
(8) Amounts may not total due to rounding.
About Herbalife
Herbalife Nutrition is a global nutrition company whose purpose is to
make the world healthier and happier. The Company has been on a mission
for nutrition - changing peoples lives with great nutrition products &
programs - since 1980. Together with our Herbalife Nutrition independent
distributors, we are committed to providing solutions to the worldwide
problems of poor nutrition and obesity, an aging population,
sky-rocketing public healthcare costs and a rise in entrepreneurs of all
ages. We offer high-quality, science-backed products, most of which are
produced in Company-operated facilities, one-on-one coaching with an
Herbalife Nutrition independent distributor, and a supportive community
approach that inspires customers to embrace a healthier, more active
lifestyle.
Our targeted nutrition, weight-management, energy and fitness and
personal care products are available exclusively to and through
dedicated Herbalife Nutrition distributors in more than 90 countries.
Through its corporate social responsibility efforts, Herbalife Nutrition
supports the Herbalife Family Foundation (HFF) and its Casa
Herbalife programs to help bring good nutrition to children in need. The
Company is also proud to sponsor more than 190 world-class athletes,
teams and events around the globe, including Cristiano Ronaldo, the LA
Galaxy, and numerous Olympic teams.
The company has over 8,000 employees worldwide, and its shares are
traded on the New York Stock Exchange (HLF ) with net sales of
approximately $4.5 billion in 2016. To learn more, visit Herbalife.com
or IAmHerbalife.com.
The company also encourages investors to visit its investor relations
website at ir.herbalife.com
as financial and other information is updated and new information is
posted.
Forward-Looking Statements
This release contains "forward-looking statements" within the meaning
of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Although we believe that the expectations
reflected in any of our forward-looking statements are reasonable,
actual results could differ materially from those projected or assumed
in any of our forward-looking statements. Our future financial condition
and results of operations, as well as any forward-looking statements,
are subject to change and to inherent risks and uncertainties, such as
those disclosed or incorporated by reference in our filings with the
Securities and Exchange Commission. Important factors that could cause
our actual results, performance and achievements, or industry results to
differ materially from estimates or projections contained in our
forward-looking statements include, among others, the following:
--
our relationship with, and our ability to influence the actions of,
our Members;
--
improper action by our employees or Members in violation of applicable
law;
--
adverse publicity associated with our products or network marketing
organization, including our ability to comfort the marketplace and
regulators regarding our compliance with applicable laws;
--
changing consumer preferences and demands;
--
the competitive nature of our business;
--
regulatory matters governing our products, including potential
governmental or regulatory actions concerning the safety or efficacy
of our products and network marketing program, including the direct
selling market in which we operate;
--
legal challenges to our network marketing program;
--
the consent order entered into with the FTC, the effects thereof and
any failure to comply therewith;
--
risks associated with operating internationally and the effect of
economic factors, including foreign exchange, inflation, disruptions
or conflicts with our third party importers, pricing and currency
devaluation risks, especially in countries such as Venezuela;
--
uncertainties relating to interpretation and enforcement of
legislation in China governing direct selling and anti-pyramiding;
--
our inability to obtain the necessary licenses to expand our direct
selling business in China;
--
adverse changes in the Chinese economy;
--
our dependence on increased penetration of existing markets;
--
contractual limitations on our ability to expand our business;
--
our reliance on our information technology infrastructure and outside
manufacturers;
--
the sufficiency of trademarks and other intellectual property rights;
--
product concentration;
--
our reliance upon, or the loss or departure of any member of, our
senior management team which could negatively impact our Member
relations and operating results;
--
U.S. and foreign laws and regulations applicable to our international
operations;
--
uncertainties relating to the United Kingdoms vote to exit from the
European Union;
--
restrictions imposed by covenants in our credit facility;
--
uncertainties relating to the application of transfer pricing, duties,
value added taxes, and other tax regulations, and changes thereto;
--
changes in tax laws, treaties or regulations, or their interpretation;
--
taxation relating to our Members;
--
product liability claims;
--
our incorporation under the laws of the Cayman Islands;
--
whether we will purchase any of our shares in the open markets or
otherwise; and
--
share price volatility related to, among other things, speculative
trading and certain traders shorting our common shares.
We do not undertake any obligation to update or release any revisions
to any forward-looking statement or to report any events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events, except as required by law.
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SOURCE: Herbalife
Herbalife Nutrition
Media:
Jennifer Butler, 213-745-0420
jenb@herbalife.com
or
Investor Relations:
Alan Quan, 213-745-0541
alanqu@herbalife.com