Herbalife Ltd. (NYSE:HLF) Sales And Profit Exceed Expectations

Herbalife Ltd. (NYSE:HLF) Sales And Profit Exceed Expectations

Sales and profit for Herbalife Ltd. (NYSE:HLF) surpassed expectations of analysts as shown in a report that was released recently. The earnings of the company reached $118.8 million for the first quarter or around $1.10 per share. This is higher than the $108.2 million and $0.88 per share earned by the company during the same period a year ago.

The revenue also increased by 17 percent compared to last year at $1.1 billion. Last year, the shares of the company were affected by the questions made by David Einhorn on its business model. The company was also accused of running a pyramid scheme by Bill Ackman, hedge fund manager of Pershing Capital Management.

Accusations of insider trading in the stocks of Herbalife Ltd. (NYSE:HLF) resulted to the resignation of KPMG as the auditor of the company. The approval for the financial reports of the company was also withdrawn by KPMG, which became a new concern for the company.

Despite the issues hounding the company, Carl Icahn acquired 15 percent of the shares of Herbalife Ltd. (NYSE:HLF). Due to this Icahn was able to nominate directors into the board of the company. The nominees of Icahn were approved by the shareholders recently. A number of analysts were also optimistic about the company with seven recommending that the stocks of the company to be purchased.

The issue is the compensation system that the company has for its independent distributors. Commissions are given to the distributors for their own sales and the sales of their recruits. Ackman indicated that majority of the distributors would break even while others will lose money. Only a small number turn in a good amount of profit.

The company revealed that most of those who sign up do so to get a discount for the products that they personally consume.

However, Ackman was not convinced by the sales of the company as he revealed that earnings do not matter in a pyramid scheme.

The products of the company are sold through distributors, who sign up clients. The distributors also provide advice to their clients, who purchase the products.

Shares of Herbalife Ltd. (NYSE:HLF) closed higher by 1.2 percent at $38.75.

Posted by James Fried on Wednesday May 01 2013, 3:25 AM EST. Ref: LA Times. Link. All trademarks acknowledged. Filed under Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0