Herbalife Posts Sales Growth in Q1

LOS ANGELESHerbalife Ltd., whose business model has come under scrutiny, on Monday reported growth in its first-quarter sales and bottom line.

For the quarter ending March 31, net sales increased 17% to $1.1 billion, while Herbalife's profit rose to $118.9 million or diluted earnings per share of $1.10.

The results could boost Herbalife's credibility following accusations from hedge fund investor William Ackman of Pershing Square Capital that the global nutritional products company operates an unsustainable pyramid scheme.  The company is the subject of a Securities and Exchange Commission inquiry, although Herbalife executives have emphatically maintained its business is legitimate.

Earlier this month, KPMG LLP notified Herbalife it was resigning as the company's independent accountant following revelations that one of KPMG's former partners was involved in insider trading. According to Herbalife, KPMG said its decision was unrelated to "Herbalife's financial statements, its accounting practices, the integrity of Herbalife's management or for any other reason." Herbalife still has not engaged a new accounting firm, although it is looking for one.

Four months ago, Herbalife was accused of running a pyramid scheme, exploiting naïve distributors under a business model that will eventually collapse. The company later responded that, with the exception of a court ruling in Belgium that is on appeal, it had never been found to operate an unlawful pyramid scheme. The 33-year-old Herbalife also cited figures to rebut claims that few consumers actually purchase its products. In a regulatory filing Monday, Herbalife characterized Ackman's allegations as "inaccurate and misleading".

Ackman, however, is so confident in Herbalife's eventual unraveling that he is said to have bet $1 billion against the company. But another prominent investor, billionaire Carl Icahn, has placed his faith and funds in the multi-level marketing behemoth. Last week, CNBC reported, Herbalife shareholders voted to name two individuals with Icahn ties to the company's board of directors. Icahn, Icahn Enterprises Holding L.P. and related entitles hold roughly 13.6% of Herbalife's outstanding shares, according to a Feb. 28 Herbalife press release.

Herbalife sells weight management products, nutritional supplements, energy, sports and fitness products, as well as personal care products. As of March 31, the company sold its products in 88 countries through a network of 3.6 million distributors.