Herbalife China Expansion Slow But On Track For 2006, COO Predicts
This article was originally published in The Tan Sheet
Executive Summary
Herbalife remains on track to build its presence in China despite delayed implementation of direct-selling regulations in that country
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Herbalife remains on track to build its presence in China despite delayed implementation of direct-selling regulations in that country. "The delayed timing of the regulations has not impacted our original strategy," Herbalife COO Greg Probert stated in a May 2 first-quarter earnings call. The company is aiming to implement a temporary expanded retail model in China to increase exposure until the regulations are issued, Probert explained. Under the firm's "bridge strategy," Herbalife will convert to the final direct-selling model after the regulations are in place. "Once the regulations are issued and our direct-selling license is obtained, we expect to convert our flexible model in six to eight months," the exec said. The firm plans to continue building its presence in China throughout the remainder of the year. In 2006, Probert expects the Chinese market to be a strong contributor to both top- and bottom-line growth. Despite the hold ups in China, Herbalife experienced a successful first quarter as net sales rose 14.8% to $372 mil. Earnings jumped 83.3% to $27.5 mil. excluding the effect of recapitalization transaction expenses. U.S. net sales were higher than expected with an increase of 4.4%, but "consistent with trends in other turnaround markets," Johnson commented. Herbalife expanded its U.S. product portfolio with Liftoff effervescent energy drink tablets and NouriFusion skin care line introduced in April. The firm expects to introduce the products to other markets during the next two years. International growth was particularly strong in the Americas and Asia Pacific regions, where sales increased 26.4% to $140.6 mil. and 30% to $60 mil., respectively. The firm also introduced its top-selling Shapeworks weight-management program in Japan, Jamaica and several Eastern European markets during the quarter. |