Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Herbalife Ltd (HLF, Financial) reported Q3 net sales of $1.2 billion, in line with guidance, and adjusted EBITDA of $167 million, exceeding expectations.
- The company achieved a 14% year-over-year increase in new distributor recruitment, marking the second consecutive quarter of growth after 12 quarters of decline.
- Herbalife Ltd (HLF) reduced its total leverage ratio to 3.3 times, as part of its strategy to decrease total debt by $1 billion within five years.
- The company launched new products, including Herbalife gels in EMEA and the Herbalife 24 program, expanding its portfolio and meeting market-specific needs.
- Herbalife Ltd (HLF) is enhancing sustainability efforts, such as transitioning packaging to reduce plastic use and carbon footprint, aligning with its environmental goals.
Negative Points
- Q3 net sales were down 3.2% year-over-year, with a 5.4% decline in overall volumes, indicating challenges in maintaining sales momentum.
- China's net sales decreased by 16% year-over-year, impacted by a shift in focus to customer acquisition over sales representative recruitment.
- Despite improvements, North America still faces challenges with distributor churn and retention, affecting overall sales volume growth.
- The company faces FX headwinds, which negatively impacted reported net sales by 290 basis points year-over-year.
- Herbalife Ltd (HLF) is still in the process of rebuilding its distributor base, which may take time to translate into significant sales growth.
Q & A Highlights
Q: Can you provide more color on the underlying drivers related to sales volume in North America and what needs to happen to turn around the overall sales volumes in major regions?
A: Stephan Gratziani, President, explained that the focus is on rebuilding the distributor base and improving productivity. Initiatives like the Mastermind program are helping leaders adjust their models for better effectiveness. The timeline for sales volume recovery depends on the speed of distributor base growth, with improvements expected quarter by quarter.
Q: What are the latest plans for further price increases and input costs?
A: John DeSimone, CFO, stated that most price increases for the year are already implemented, with a few markets like India pending. Input costs have been stable, and no significant changes are expected in the near term.
Q: How are you addressing distributor churn and retention in North America?
A: Stephan Gratziani highlighted the focus on supporting distributors with effective models tailored to their markets. The aim is to improve productivity and retention by understanding and implementing successful strategies from other regions.
Q: Can you provide an update on the diabetes prevention program in North America?
A: Stephan Gratziani mentioned that top-level distributors have become certified lifestyle coaches, and the program will be scaled to train more distributors. The engagement with consumers will vary, with some offering the program in clubs and others online.
Q: What is the impact of macroeconomic factors on demand in developing markets, and how are you addressing it?
A: Stephan Gratziani emphasized the importance of delivering value through products and services. The focus is on enhancing customer experience and adapting business models to meet market needs, as seen in successful examples like the UK market.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
