Estimated Profits Of Herbalife Surpass Expectations

Estimated Profits Of Herbalife Surpass Expectations

Even as the estimated profit and sales of Herbalife for the fourth quarter surpassed industry estimates, questions were raised on the sales practices of the company by investor William Ackman.

Shares of the company increased by six percent following an announcement by the company that its share repurchased program increased to $1.5 billion. However, following the claims of Ackman, shares declined lower than what it gained earlier.

Ackman indicated that new distributors were discovered by the company through a business convicted of an unlawful pyramiding scheme in Canada ten years ago. The claim followed the release of the expected fourth quarter results of the company.

Former distributor Shawn Dahl was highlighted by Ackman, indicating that the false promises were made to attract new distributors to the company.

No statements were released by Herbalife in connection to the claims of Ackman.

Ackman still believes the share price of the company will sooner or later go down to zero once his allegations are investigated by regulators. On the other hand, the company has continuously denied allegations of running a pyramid scheme, which normally increases income through the recruitment of distributors instead of selling the products themselves.

Although shares of the company have declined by 20 percent for the year, they remain higher by 80 percent in the past twelve months. A number of big-time investors who opposed Ackman include George Soros and Carl Icahn. Icahn is the biggest shareholder of the company with around 16.8 percent. Regulators are essential in the drive of Ackman against Herbalife.

The products of the company are sold through an independent distributor network. The company revealed that it earned around $1.30 for every share during the fourth quarter of last year. In comparison, industry watchers expected profits reaching around $1.17 for each share.

Sales of the company in the fourth quarter increased by around 19.8 percent, as it reached $1.27 billion. Herbalife also reaffirmed its adjusted earnings forecast for 2014.

Posted by James Fried on Wednesday February 05 2014, 2:49 AM EST. Ref: Reuters. Link. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0