Research Question: With increasing skepticism about its business model, will Herbalife experience declining sales in the next three to 12 months?
Companies: Herbalife (HLF)
Blueshift’s initial research indicates lingering skepticism over Herbalife’s business model, with the company’s attempts to provide more clarity being met with mixed results.
- Since renowned hedge fund giant David Einhorn questioned Herbalife’s business model on the company’s May Q1 earnings call and changed the market’s perception of its stock, Herbalife has found itself defending its operations. Despite providing clarity to the percentage of consumer vs. distributor sales on its latest earnings call, increasing its share repurchasing program, and announcing the hiring of a marketing-research firm to study the habits of its consumers, skepticism about Herbalife’s business model persist.
- Herbalife contends its business continues to grow. On its latest earnings call, Herbalife increased its volume outlook and raised guidance, crediting its systemized training approach, “city by city” distribution method and continued support from long-term customers. Herbalife is gaining traction with its daily consumption business model, helping boost overall U.S. net sales 22% year to year. Overall, five of Herbalife’s six regions exceeded 15% sales growth in Q2 compared to the previous year.
- Blueshift’s May 2011 Herbalife report found that despite concerns about the company’s business model, sources strongly believed Herbalife’s products and strategies are effective, with demand growing in Europe.
To gain further insight into the affect questions surrounding Herbalife’s business model is having on company sales, Blueshift will gather data from sources in the following silos: Distributors, competitors, nutritionists/dietitians, supplement users, and industry specialists.
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