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Herbalife Disappoints in 3Q17, Stock Falls

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Herbalife Disappoints in 3Q17, Stock Falls PART 3 OF 4

Herbalife: 3Q17 Sales Fell Year-over-Year, Missed Estimates

Lower volumes remained a drag

Herbalife’s (HLF) sales of $1.1 billion in 3Q17 missed analysts’ estimate and fell 3.3% on a YoY (year-over-year) basis. The company’s volume points fell across its key markets, including the United States, Mexico, South and Central America, and China (FXI). However, favorable currency rates helped its top-line performance during the reported quarter. Herbalife’s sales have fallen YoY for four consecutive quarters.

Herbalife: 3Q17 Sales Fell Year-over-Year, Missed Estimates

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In comparison, Usana Health Sciences’ (USNA) 3Q17 top line rose 3.0% YoY. Nu Skin Enterprises’ (NUS) 3Q17 sales fell 6.7%. Analysts estimate a 5.3% fall in Vitamin Shoppe’s (VSI) top line in its upcoming quarter.

Herbalife’s performance by region

Herbalife continued to report sluggish sales in 3Q17 across most of its geographies, reflecting lower volume points. However, favorable currency rates helped its quarterly sales numbers. Its volume points fell 16.1% in North America due to the negative impact of its business transition following the FTC (Federal Trade Commission) settlement. The region’s sales fell 17.1%.

Herbalife’s sales in Mexico improved 1.3% YoY, driven by favorable currency rates. However, volume points fell 9.0% due to the recent earthquakes. Volume points fell 6.8% in South and Central America, while sales fell 3.6%. The company’s volume points improved 2.0% in the EMEA (Europe, the Middle East, and Africa) region, while sales rose 6.1%, driven by favorable currency rates. Volume points rose 1.0% in the Asia Pacific region, while sales fell 0.2%.

Herbalife’s sales in China (FXI) continued to remain soft and fell 2.1% YoY. Lower volume points (-3.5%) on limited distributor activities took a toll on the region’s performance in 3Q17.

Outlook

Herbalife projects its top line to improve 2.3%–7.3% in 4Q17. The guidance includes about 300 basis points of benefit from favorable currency rates. However, for 2017, sales are expected to fall 1.9%–0.6%. For 2018, net sales are estimated to rise 5.5%–9.5%.

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