Herbalife (HLF, Financial) is a global nutrition company that has helped people pursue an active, healthy life since 1980. It products range from protein shakes and snacks, energy and fitness drinks to vitamins and nutritional supplements and a complete bath and body care line. These are available exclusively through Herbalife members in over 90 countries.
It recently posted strong fourth-quarter results. 2015 was a significant year for Herbalife, as it completed the rollout of bold and important changes to the marketing plan that will enhance the long-term and sustainable growth of its business. It successfully navigated the associated short-term challenges, and despite ongoing currency and macroeconomic challenges, Herbalife finished the year returning to growth.
Strong fourth quarter and full year results
The company reported fourth quarter net sales of $1.1 billion. Net sales, excluding currency impact, grew by 9.7%, while reported net sales declined 3.1% primarily due to the continuing unfavorable impact of currency exchange rates.
Adjusted earnings for the quarter were $1.19 per diluted share ($1.41 per diluted share during the prior-year quarter).
On a reported basis, fourth quarter net income was $84.5 million, or 98 cents per diluted share (which was $103.3 million, or $1.21 per diluted share, during the prior-year quarter). Fourth quarter 2015 net income and diluted EPS were negatively impacted by $26.0 million and 30 cents per diluted share, due to currency fluctuations.
For the quarter ended Dec. 31, 2015, the company generated $135.5 million in net operating cash flow and invested $30.4 million in capital expenditures.
For the year ended Dec. 31, 2015, the company reported net sales of $4.5 billion (a 9.9% decrease from the prior-year period). Local currency net sales increased 4.7% from the prior-year period. Adjusted earnings for the year were $5 per diluted share ($5.93 per diluted share during the prior period). On a reported basis, full year net income grew 9.8% and was $339 million, or $3.97 per diluted share ($309 million, or $3.40 per diluted share, during the prior-year period). Full year 2015 net income and diluted EPS were negatively impacted $137.8 million, or $1.57 per diluted share, due to currency fluctuations.
For the year ended Dec. 31, 2015, the company generated cash flow from operations of $628.7 million and invested $79.1 million in capital expenditures.
Guidance for 2016
The company expects the following:
- Full year 2016 currency adjusted EPS guidance is in the range of $4.85-$5.30.
- Effective tax rate to be around 28% to 30%.
- Currency adjusted net sales growth to be in the range of 5.5% to 8.5%.
- Volume point growth to be in the range of 1.5% to 4.5%.
- Net sales growth to be up to 2.5%.
- Adjusted diluted EPS to be in the range of $4.05 to $4.50.
Awards and recognition
Herbalife Russia won in the “Best Snacks Trademark” category for its Protein Bars at the 2015 Healthy Nutrition Awards. The annual awards recognize leading companies that have made a significant contribution to the development and support of the healthy nutrition concept.
Herbalife won in two categories of the prestigious festival-contest "Choice of the Year – 2015": "Dietary Supplements of the Year" (for the third consecutive time) and "The weight management program" (for the second consecutive time). The contest annually determines the best national goods and services by nationwide study of consumer preferences and expert evaluation of the quality of goods. The winners are defined by marketing research of consumer preferences which is carried out by TNS research agency. The contest results are confirmed by the international audit company Deloitte. The project initiated by Festivals International (USA) and European Marketing Foundation (European Foundation for Social Research, Brussels, Belgium) at the European Chamber of Commerce Industry and Trade (Brussels) (European Chamber of Commerce).
(Source: Company’s website)
On a concluding note
Across the globe, more and more health-conscious consumers are looking to take their nutrition and health more seriously. Herbalife is well-positioned to meet these consumers' needs through its extensive product range and the personalized approach of its members. It looks to bounce back. The company is making significant changes to its marketing strategy. This company is a buy.
Disclosure: I do not hold any position in the company.
