Bill Ackman Betting on Zero

“A couple time we come across a company we think is causing harm, we can make money betting against that company.” —Bill Ackman

“Herbalife stock goes down, we make money. Herbalife stock goes up, we lose money. And that’s short selling.” —Bill Ackman

“[Interviewer] What are you accusing Herbalife of? [Bill Ackman] Of being a pyramid scheme.” —Betting on Zero, 2017

About the Movie

“From ‘Darfur Now’ writer/director Ted Braun comes a riveting docu-thriller following controversial hedge fund titan Bill Ackman as he puts a billion dollars on the line in his crusade to expose Herbalife as the largest pyramid scheme in history. Herbalife claims Ackman is simply a market manipulator out to make a fortune from short-selling their stock, but Ackman insists Herbalife deliberately targets low-income and immigrant communities and robs them of their life savings. Herbalife is joined on the counterattack by longtime Ackman nemesis (and fellow Wall Street billionaire) Carl Icahn, while Ackman finds an unlikely ally in Chicago activist Julie Contreras, who rallies the Latino community to get the Federal government to intervene. Blending tales of high-stakes corporate intrigue with working-class people caught in the crossfire, Braun paints a stirring picture of the American Dream gone wrong.” (Source: iTunes Preview)

The Betting on Zero documentary is available via iTunes.

Disclosure: I am not receiving any compensation for any of the links provided. I have no business relationship with any company or individual mentioned in this article. I have no position in any stock mentioned. 

Herbalife: A Look at Sales, Volume Points and Average Active Sales Leaders

Herbalife: Third Quarter 2015 Results

Herbalife announced its third quarter 2015 results this Wednesday, and the change in net sales was disclosed as follows.

Herbalife Ltd. (NYSE: HLF) reported third quarter net sales of $1.1 billion. Local currency net sales grew by 5%, while reported net sales declined 12% primarily due to the continuing unfavorable impact of currency exchange rates. (Source: Herbalife)

In this post I will take a look at the change in net sales, and compare it to the change in volume points and average active sales leaders, both two of Herbalife’s key metrics.

Before we move on to the numbers, let’s see what CEO Michael Johnson had to say about the business of Herbalife at the moment, and the underlying trends.

Michael Johnson, chairman and CEO stated, “The improving trends we continue to see in both performance and member metrics reinforce our belief that we are building an Herbalife focused on creating the very best customer and member experience while delivering long term value for our shareholders.”

Johnson continued, “We remain focused on building a brand that is synonymous with good nutrition. Our members have embraced this concept and their activity and engagement remains high.” (Source: Herbalife)

Regional Net Sales, Volume Points and Average Active Sales Leaders

In the table below I have put together some financial and non-financial data (from Herbalife 10-Q’s) for each of the quarters so far in 2015, from which I have calculated the following metrics:

  • Line item as % of total
  • Change in % from prior quarter
  • Change in % year-over-year

Regional Net Sales

Total net sales (excl. FX) declined 12 % YOY, and 5 % sequentially. Excluding FX net sales increased by 5 %. All regions posted negative growth rates YoY (incl. FX) except for China. The interesting thing to follow going on will be what future growth rates will look like in China. See table below (click image to enlarge) includes the first three quarters of fiscal year 2015.

HLFF1

Regional Volume Points

Total volume points declined in Q3, -4 % year-over-year and -3 % sequentially. Most of the regions posted negative growth rates. The third quarter also was the first one so far during 2015, where sequential growth in volume points was negative.

HLFF2

Regional Average Active Sales Leaders

The growth in average active sales leaders was 4 % year-over-year, and 3 % sequentially. North America, Mexico, and South and Central America all posted negative growth rates year-over-year, and EMEA and China posted the highest positive growth rates with 25 % and 31 %.

The change in regional average sales leaders was the only of the three in this post, showing positive growth both year-over-year and sequentially.

HLFF3

The Show (Must) Go On…

From this quick review we have gotten some insights into the change in Herbalife’s business fundamentals so far in 2015. For what it’s worth, even though it’s only a short-term comparison, we get a good glimpse of Herbalife’s development in net sales, volume points, and average active sales leaders during 2015.

Herbalife has been making the headlines ever since Bill Ackman disclosed his short position in the stock back in the end of 2012, and will probably stay in the spotlight for some time, at least as long as the issues regarding its business model is under scrutiny.

Disclosure: I have no positions in Herbalife stock at the time of writing this post. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is informational and is in my own personal opinion. It should not be considered as an investment case, either for or against the business. Always do your own due diligence and contact a financial professional before executing any trades or investments.