Herbalife, the world’s largest MLM devoted solely to the sales of nutritional products, brought in $1.3 billion in top-line revenue in the quarter, which represented an 8.6% increase over the same period a year before. In North America, however, sales were up by 38% year over year.
This bucks a trend of some years’ standing in which multi level marketing firms selling supplements and functional foods struggled in the North American market. Herbalife, Usana and Nature’s Sunshine had all recorded sales declines and fewer active distributors. Various reasons for these struggles were advanced, including the strong economy and low unemployment figures meaning fewer people were looking to earn extra income on the side.
Sales growth likely to flatten but will settle at higher base level, exec says
But Herbalife turned that picture around recently, with increasingly strong results in North America. Some reasons have been put forth for the surge in the company’s fortunes in this market, especially in the months of May and June, such as more people stuck home and/or out of work and looking for ways to pass the time as well as to make some additional income. During an earnings call with analysts, CFO John DeSimone was unwilling to speculate on the precise reasons for the surge. But he said that it stands to benefit the company long term.
“So, I think there is some truth that globally, the industry is doing well for whatever reasons you want to ascribe to — it’s really hard to know,” DeSimone said. “I mean obviously long-term, the type of growth we are seeing now, it’s got to flatten a little bit, but I think it does give us a new foundation.”
The earnings call with analysts was posted on the site seekingalpha.com.
In addition to moving more product than it ever had before, Herbalife earned more on those sales, too. The company recorded a profit of $115 million for the quarter, or 95 cents adjusted earnings per share. That represented a 36% increase over the same period in 2019.
Investments in sales platforms paved way for China results
Sales were up 18% in China, which CEO John Agwunobi attributed to ongoing investment in that market, some of which came out of a Chinese government business development fund. The new investments helped distributors cope with the many restrictions put into place in China to contain the spread of the coronavirus.
“During the quarter, we made further upgrades to our recently developed personal stores platform on WeChat, including new features such as live streaming and optimization of our landing page. Volume, coming from our China service providers and sales representatives’ personal stores, accounted for approximately 23% of total sales in the country,” Agwunobi said.
Stock traders were mostly unmoved by the company’s volume record. The company’s shares were trading at $52.61 before the earnings release on Thursday and were trading at about $50 today. Herbalife shares hit an all-time high of more than $60 a share in February 2019.