Herbalife: Down Mexico Way
Herbalife's (HLF) share price plummeted on Jan. 5, after the Los Angeles-based nutritional supplements-maker warned that it had lower sales growth in Mexico during the fourth quarter ended December 31.
Herbalife thinks its net sales will range between $482.7 million and $484.7 million for the quarter, reflecting a year-over-year increase of at least 18%. The mean analyst estimate had been for $488.3 million revenue during the quarter, according to the San Francisco research firm StarMine, which aggregates data from Thomson Financial.
In the first quarter of 2007, the company expects to have net sales growth between 6% and 10%.
"Our distributors had a tremendously successful year expanding their businesses into new markets and more deeply penetrating existing markets," said CEO Michael O. Johnson in a press release. He thinks the adverse impact of slower sales growth in Mexico during 2007 will be partly offset by growth in other countries such as the U.S.
Investors sold the stock 23.4% to $30.11 on the New York Stock Exchange.
During a conference call with analysts, Herbalife said it now expects flat Mexican sales in 2007. "Not only is Mexico Herbalife's largest market, but we estimate it supplied about half of the total revenue growth in both '05 and '06," said Standard & Poor's equity analyst Loran Braverman. (S&P, like BusinessWeek.com, is owned by The McGraw-Hill Companies.) Braverman cut a 12-month target price by $8 to $35, noting lower expectations of the company's earnings growth in 2007.