Herbalife says amazing sales track record due to global demand, not pyramid scheme


The Numbers: Protein shakes company Herbalife beat analyst estimates, posting profits of $118.9 million on sales of $1.12 billion. Company shares were up 0.26% in after hours trading.

What’s Interesting: The company—which has been the subject of high profile accusations that it is nothing more than a pyramid scheme—has had an amazing run, with results topping analyst expectations for 17 consecutive quarters. But as we said before, that record has raised some eyebrows. Herbalife says bluntly that it’s not a pyramid scheme and there are real customers for its energy drinks and other products. And during the first quarter, increasing demand in South America helped drive results, the company said. Herbalife also raised its full-year forecast, citing growing global sales.

The Takeaway: The fight over Herbalife between activist investors Bill Ackman (who has argued vociferously that the company is a pyramid scheme) and Carl Icahn (who says it isn’t) hasn’t done anything to dampen sales. But the dustup has beaten up the shares. (They’re down 45% over the last 52 weeks.) Herbalife also faced a setback when its auditor, KPMG, announced it had fired an executive who is accused of trading insider information on Herbalife and other client companies. Still, the company clearly generates profits—even if people have serious questions about its methods.

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