Global health and wellness company Herbalife Ltd. (HLF—NYSE) reported its third quarter earnings on Monday after markets closed, disappointing investors with its earnings miss and a lower than anticipated fourth quarter outlook. Adjusted net income for the quarter was $125.1 million, or $1.45 per diluted share, compared to $152.1 million, or $1.41 per diluted share for the same period in 2013.
On the news, shares dropped 11 percent to $49.60 during after-hours trading, according to MarketWatch, and continued to fall to $44.26 by close on Tuesday. Wall Street expected earnings per share to come in at $1.51, up from $1.41 at the same time last year.
On a positive note, Herbalife reported net sales of $1.3 billion, reflecting an increase of 4 percent compared to the same period in 2013, and, according to CEO Michael O. Johnson, the quarter saw volume increases in two-thirds of the company’s 91 countries, especially Russia and China.
Johnson sought to allay concerns about the company’s forecast during its earnings call with investors on Tuesday. “While the third quarter represented a record level of net sales, our performance was below expectations, and this performance was clearly out of character for us,” Johnson said. “There was a confluence of factors—some external and some internal—that had an impact on our results. The main factors were Venezuela, FX and the short-term effect of structural changes that we are making to our business.”
Net income fell 92 percent to $11.2 million, or 13 cents a share, down from $142.0 million or $1.32 per diluted share for the same period in 2013. Third quarter 2014 reported net income was negatively impacted by $139.5 million in pre-tax charges, or 97 cents per diluted share after tax, related to the remeasurement of the Venezuelan Bolivar, and $17.5 million in pre-tax charges, or 13 cents per diluted share after tax, related to a legal reserve.
Guidance for fourth quarter FY 2014 included an unfavorable impact from currency rates of approximately 31 cents compared to the prior year, inclusive of approximately 22 cents from Venezuela. Guidance for FY 2015 includes a currency headwind of approximately 66 cents, including approximately 45 cents from Venezuela.
