Herbalife shares plummeted on Friday by close to 11% as investors received a dimmer outlook from the company for 2015. The company on Thursday after the close of the market released its earnings report for the fourth quarter.
Entering the earnings announcement, it appeared investors were focused on if the company could meet the earnings projections it had made of itself. In fact, it did just that posting $1.41 a share adjusted earnings.
However, besides the disclosure of its earnings for the fourth quarter, Herbalife updated projections it had previously made for the full year 2015. Those projections did not sit well with investors.
Herbalife is expecting its net sales to drop by 6% to 9% during 2015. The seller of diet shakes and supplements said volume point growth could fall as much as 4.5%.
The company said its per share diluted earnings for 2015 could be from $4.10 a share to $4.50 a share. Previously, Herbalife indicated that its diluted earnings for 2015 per share would be from $5.45 to $5.75.
Bill Ackman the billionaire manager of hedge funds has called the company a pyramid scheme. He said it would collapse and his hedge fund Pershing Square’s short campaign against Herbalife has sparked government regulators to start an investigation.
Herbalife changed business practices because of it and has adopted a sales initiative called Gold Standard and new plans for compensation that appear to impact new distributor sales. The foreign operations of Herbalife have been hit with currency headwinds due to the strength of the U.S. dollar.
Michael Johnson the CEO said that even though in many respects 2014 had been a record year, there are many unique challenges the company faces.
Johnson said he expected that volumes would be hardest hit during the ongoing first quarter. The company added Johnson is expecting 2015 to have sequential improved throughout the year as it continues the journey to an ideal combination of sustainability and growth.
The company’s largest shareholder, Carl Icahn disclosed Friday that his investment fund had suffered 7.4% losses during 2014 because of exposure to the energy sector and this news was not a good start for 2015 for him.