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Herbalife (HLF) Volume Growth Solid, Currency Woes Linger

Herbalife Nutrition Ltd. HLF has emerged a lucrative investment option on the back of steadily rising sales volume points across major markets. This renowned wellness and weight management company’s shares have gained 7.4% in the past three months against the industry’s decline of 6.9%. However, adverse currency headwinds and stiff competition have been plaguing the company for some time. Let’s delve deeper and analyze the factors impacting the stock.

Robust Volumes & Portfolio Aid Performance

Improving volume points have been aiding the company’s growth. Notably, the recently unveiled preliminary volume point outcome for the fourth quarter of 2018, depicts year-over-year growth of 11.6%. On adjusting for various products in Mexico, North America, and South & Central America, worldwide volumes would showcase a rise of 10.8%.

Prior to this, in the third quarter, volume points advanced 15% to 1,506.9 million, exceeding management’s projections. This marks the second highest volume points achieved by the company, following second-quarter 2018, as well as highest year-on-year volume points growth since 2012. Additionally, volumes depicted double-digit growth in four of the top five markets for the second consecutive period. Clearly, management’s efforts to keep pace with consumers’ preferences and effective direct-selling strategy are paying off. Going ahead, Herbalife expects volumes to rise 8.6-9.6% in 2018.


Herbalife’s volume growth is also aided by a strong product portfolio, which includes weight management, targeted nutrition, energy, sports and fitness products. The company continues to expand product portfolio to enable distributors to retain old customers and draw new ones. Incidentally, the company introduced 58 products across 51 countries in the third quarter. Further, the company launched a High Protein Iced Coffee, which is expected to be a healthier alternative for traditional coffee. Further, the company is on track with launching new flavors for existing brands, considering local tastes and preferences.

Apart from these, Herbalife gains from a strong geographic presence, with its products accessible in more than 94 countries worldwide. In fact, the top 10 nations in the world accounted for 71.8% of Herbalife’s net sales in 2017.

Can Hurdles Restrict Growth?

Herbalife’s significant global presence exposes the company to adverse currency movements. Incidentally, currency headwinds weighed on the gross margin in the third quarter of 2018. Management expects headwinds to persist and dent fourth quarter as well as 2018 performance. Further, the company is exposed to stiff competition from other retailers as well as distributors of weight management and nutritional products.

Nonetheless, we expect this Zacks Rank #3 (Hold) company’s extensive business spread, focus on solidifying brands and a strong direct-selling network to continue bolstering performance and enable it to tide over the aforementioned hurdles. In fact, the company’s projections for 2018 and 2019 are a reflection of its superb past record and confidence in future prospects.

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