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Herbalife Profit Trails Analysts’ Estimates

Herbalife Distribution Center
An employee carries a box of products for shipment to a truck at the Herbalife Ltd. Los Angeles distribution center in Carson, California, on March 4, 2014. Photographer: Patrick T. Fallon/Bloomberg

Herbalife Ltd., the nutrition company facing a U.S. probe spurred by billionaire hedge-fund manager Bill Ackman, posted second-quarter profit that trailed analysts’ estimates as sales volumes fell in the Americas.

Excluding some items, earnings were $1.55 a share, the Los Angeles-based company said today in a statement. That missed the $1.57 average of four analysts’ estimates compiled by Bloomberg. The shares slid as much as 12 percent in extended trading.

The North America unit, which includes the U.S., “was a little lighter than we expected,” Chief Financial Officer John Desimone said in an interview after the results were posted. “It was still the best quarter in our history.”

Chief Executive Officer Michael Johnson has fought back against a two-year assault by Ackman, who says the company is an illegal pyramid scheme. While the U.S. Federal Trade Commission is investigating Herbalife’s practices, the multilevel marketer’s shares have gained under the attack, surging 25 percent July 22 after Ackman publicly detailed new allegations. Herbalife has repeatedly denied being a pyramid scheme.

Revenue rose 7.1 percent to $1.31 billion in the quarter, missing analysts’ projections, as sales volume fell 1 percent in North America and 7 percent in South and Central America. Net income dropped 17 percent to $119.5 million, or $1.31 a share, from $143.2 million, or $1.34, a year earlier.

Stock Decline

Herbalife shares dropped 11 percent to $59.95 at 5:56 p.m. in trading after the close in New York, after tumbling as low as $59.45. The stock climbed 2.1 percent to $67.48 at the close, for a decline this year of 14 percent, compared with a 7.1 percent gain for the Standard & Poor’s 500 Index.

Distraction from the World Cup soccer tournament in Brazil and a new method to qualify for discounts in the U.S. contributed to the volume growth slowdown in the Americas, Desimone said. Net income was depressed by changes in currency, including devaluation of the Venezuelan bolivar, and higher than expected taxes, he said.

Adjusted profit per share in the current year will be $6.17 to $6.32, up from a previous forecast of $6.10 to $6.30, Herbalife said today. Analysts estimated $6.30, on average.

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