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Herbalife’s 4Q17 Sales Beat Estimate, Returned to Growth

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China and EMEA drove top-line growth

Herbalife’s (HLF) top line returned to growth in 4Q17 due to its strong performances in China and the EMEA (Europe, the Middle East, and Africa). Its 4Q17 sales of $1.1 billion were above analysts’ expectation, rising 4.6% on a YoY (year-over-year) basis. Increased volumes in China and the EMEA, favorable currency rates, and higher pricing helped the company return to growth. However, persisting softness in the United States, Mexico, and South and Central America remains a drag.

In comparison, Nu Skin Enterprises (NUS) and Usana Health Sciences (USNA) also reported improved 4Q17 sales. However, analysts expect Vitamin Shoppe (VSI) to register a YoY decline in its 4Q17 top line.

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Sales by region

Herbalife’s sales in North America continued to decline, reflecting a fall of 7.3% in volume points due to its transition in the business process following the FTC (Federal Trade Commission) settlement. However, the rate of decline moderated, and the region is expected to return to growth in 2Q18. As for 1Q18, sales in the United States are likely to remain low due to a tough YoY comparison.

Herbalife’s top line improved 1.7% in the Asia-Pacific region, reflecting improved volumes and favorable currency rates. The EMEA region saw 12% growth in its top line, driven by higher volumes, new product launches, and favorable currency fluctuations.

Mexico’s top line was driven by favorable currency rates. But excluding that, sales fell 1.3%, reflecting a steep decline in volumes. Volumes fell 6.6% in South and Central America. However, sales improved 3.5%. Sales in China rose 11.9%, driven by strong YoY growth in volumes.

Outlook

The company’s management expects its 1Q18 top line to either fall 1% or increase 3%. Volume points are expected to fall 3%–7%, reflecting tough comparisons in China and North America. However, favorable currency rates are expected to boost the top-line growth rate.

For 2018, the company’s top line is projected to grow 5.5%–9.5%, driven by improvement in China and North America.

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