Just weeks after issuing its guidance and “beating” estimates that would have missed estimates issued a couple of short quarters ago, Scott Wapner at CNBC reports that Herbalife (HLF) is set to lower its sales guidance before market open tomorrow, Monday morning.
Wapner’s exclusive, out late Sunday night, stated:
Herbalife will lower its sales outlook for the current quarter before Monday’s market open, the company told CNBC, as it gears up for tougher new Federal Trade Commission regulations appeared to hurt business more than anticipated.
According to a press release reviewed by CNBC, Herbalife now expects revenues to be 1.5 percent lower than prior estimates, with a key sales metric known as volume points expected to be 3 percent below its earlier view. Earnings per share were actually increased for the quarter and the full year.
The company said the transition to the new FTC rules along with softness in Mexico was to blame for the lowered numbers.
To try and couch the blow, the company also apparently told Wapner it had been meeting standards established by the new FTC constraints on the company:
Though the company said preparing distributors for the new regulations likely impacted sales, there was a silver lining in the disappointment. Herbalife said it easily exceeded the new FTC threshold, showing that 90 percent of sales since May 1 have met the new guidelines.
“We knew we would be able to meet the threshold test of 80 percent because we knew we had real customers,” Hoffman said.
The company said it could also show that it has 400,000 so-called “preferred” members in the U.S. who buy products at a discount and aren’t pursuing the business opportunity in any way.
QTR isn’t interested in “since May 1” – he is interested in how the numbers come out over the next few quarters. The company’s preferred customer metric has widely been written about as a fallacy in articles like this one by Gary Milne. There is no doubt this fallacy has contributed to the company meeting its 80% number from the get-go. Whether or not the company can continue its 80% number form this point forward will be a question worth watching.
