Herbalife CEO Prepares to Hand Over Reigns, GNC Has Reason to Cheer Q1

Los Angeles—Michael Johnson was named CEO of Herbalife Ltd. in 2003, the year the nutrition company accumulated net sales of US$1.1 billion. Since then, Herbalife’s sales of its protein shakes, snacks and other products have quintupled to $4.5 billion in 2016, and the multi-level marketing (MLM) behemoth has expanded its operations to nearly 100 countries around the planet.

The fate of Herbalife (NYSE: HLF) now rests with incoming CEO Richard Goudis, with whom Johnson has worked for 13 years.

Johnson, who revealed he is one of Herbalife’s largest individual shareholders, will serve as the company’s executive chairman. In a May 4 earnings conference call, his last as CEO, Johnson outlined his new objective: reaching out more to “government, university and policy leaders to help usher in solutions to the growing man-made issues affecting consumer health around the world.

“I'm more convinced today that we are uniquely positioned to be a solution to many of the world's problems," Johnson said, “but specifically, the skyrocketing healthcare costs."

Goudis, meanwhile, is responsible for ensuring that Herbalife prospers as the company restructures its business in the United States under a 2016 agreement with the FTC filed in U.S. District Court in California.

May 25, just two weeks from now, is the deadline for Herbalife to adopt new procedures, including tracking retail sales and internal consumption of products by its distributors. As part of the FTC consent decree, Herbalife must segment its existing U.S. members into two categories: “distributors" and “preferred members." Preferred members purchase Herbalife’s products for a discount and aren’t eligible to earn financial rewards.

Herbalife has 360,000 preferred customers, and since Jan. 13 when U.S. members could select a category, 80 percent of new members have signed up as a preferred member, Goudis disclosed during the conference call with financial analysts.

Said Goudis, Herbalife’s incoming leader: “As we have maintained, this data continues to validate our previous research and studies that the majority of our members are comprised of customers who desire to consume Herbalife Nutrition products at a discount and not to resell the products or create a sales organization."

Secaucus, New Jersey—Vitamin Shoppe Inc. (NYSE: VSI) reported first-quarter sales of $316.9 million, a 5.9 percent decrease from the year-ago quarter ($336.8 million), reflecting a challenging period for the specialty retailer of nutritional supplements.

Shares of Vitamin Shoppe plunged nearly 33 percent after its results were announced on May 10, reported The Motley Fool, a financial stocks news and analysis website.

Total comparable sales, a key metric followed by Wall Street, were down 6.3 percent in the quarter. Vitamin Shoppe struggled with new customer acquisitions and customer retention in the sports and on-the-go categories.

Colin Watts, CEO of Vitamin Shoppe, acknowledged “disappointing" results and a “challenging" first part of the year.

However, he added, “I am encouraged by the progress we have made on our major reinvention and cost-reduction initiatives that we began developing and piloting over the last several months."

Watts revealed plans to hasten “initiatives focused on improved customer acquisition, and better store and on-line engagement," and he announced plans to introduce a substantial upgrade to the company’s relationship and retention capabilities.

Pittsburgh, Pennsylvania—GNC Holdings Inc. (NYSE: GNC) has been on a quest to transform its business model—and the first quarter was a reassuring sign. Revenues and earnings (adjusted EPS of $0.37) beat Wall Street’s expectations, MarketWatch reported.

GNC’s CEO, Robert Moran, cited “transformational changes" that had begun to pay off.

"We're encouraged by positive trends in transactions," he said in a statement, “and by the early performance of our new loyalty programs, which are demonstrating their power to increase consumer frequency and spending."

GNC’s sales, nonetheless, still show room for improvement.

In the first quarter, the company reported consolidated revenues of $644.8 million, down from $668.9 million in the prior-year period. Same-store sales decreased 3.9 percent in domestic, company-owned stores, while same-store sales declined 4.6 percent in franchise locations.

Salt Lake City, Utah—Soon after USANA Health Sciences Inc. (NYSE: USNA) disclosed in February that it had initiated a voluntary probe of its operations in China, the MLM company was sued in federal district court.

A putative shareholder class-action lawsuit was filed on Feb. 13 in the U.S. District Court for the District of Utah, according to USANA’s quarterly filing with the Securities and Exchange Commission (SEC).

The named plaintiff, Chi Wah, alleged the company failed to disclose its BabyCare subsidiary had engaged in improper reimbursement practices in China, constituting violations of the Foreign Corruption Practices Act. The complaint further alleged USANA’s revenues in China were partly the product of unlawful conduct, and that when such conduct became known, it was likely to subject the company to substantial regulatory scrutiny.

The lawsuit “is without merit," said USANA, which added it “intends to vigorously defend against all claims asserted."

Provo, Utah—Nu Skin Enterprises Inc. (NYSE: NUS) reported first-quarter revenues of $499.1 million, a 6 percent increase over the year-ago quarter.

As Nu Skin noted in its SEC filing, China strengthened sales. Revenues in mainland China ($150 million), the company’s largest territory, increased 26 percent over the year-ago quarter. By contrast, revenues in the Americas—Nu Skin’s fourth-largest territory—were essentially flat at $65.7 million.

The company reiterated its 2017 forecast of $2.26 to $2.30 billion in revenues, and EPS of $3.10 to $3.25.