As I continue to document the issues within the very troubled MLM industry, there is no shortage of material to write on. Consider the recent news about Herbalife (HLF) and Nu Skin (NUS).
For For the third time, Michael Johnson is taking over as Herbalife’s chairman and chief executive officer, a move clearly intended to appease investors. He will recall that in a previous stint as CEO, Johnson told a reporter that $1,000 “is a lot of money for a lot of people.” [see Betting on Zero, minute 36:32], like it’s elitist to sniff out $1,000. Johnson did not mention (although he likely had access to the information) that a quick look at the data would show negative earnings AFTER required purchases and spending for the vast majority of these people. He and investors made millions as Herbalife distributors racked up losses. This had been going on for years, with no noticeable improvement in the success of those seeking the “business opportunity.”
After seven years of FTC-required monitoring, the picture looks a little different. Total CEO compensation is down from $86.4 million for Johnson in 2011 to $7 million for Agwunobi in 2021. And the share price is down 63% over the past year. Writing about Herbalife on 10/31/22, Zacks noted“a reliable measure that can help investors address this [what’s next for the stock?] is the company’s earnings outlook…. Prior to this earnings release, the forecast revision trend for Herbalife LTD. Favorable…. the current status translates to a Zacks #2 (BUY) rank for the stock.” The report then makes an odd reference to CVS, a retail, insurance and PBM conglomerate, as if they and Herbalife are in the same industry.
The next day, “Herbalife reinstates former CEO, remove the guide.” Wait, Zacks said the company’s earnings outlook is “a reliable measure that can help investors.” Well, maybe that’s right after all. Instead of good news, turning to Johnson for leadership reminds this “boomer” of the lyrics of a quite famous song “If I don’t get some shelter Ooh yeah, I’m going to fade.”
investors in Nu Skin learned that “The top and bottom lines fell short of the Zacks Consensus Estimate and decreased year over year.” Those damn “higher-than-anticipated macro headwinds” attributed mostly to Asia. At the same time, the company reports “constant currency growth in four of the company’s reporting segments” and a quarterly cash dividend of $0.385 per share dividend. With a mix of bad and good news (who doesn’t like dividends), perhaps we should take a long-term view. Oh about the past five years the participation has declined 51.7%. All this brings to mind the lyrics of yet another melody, “Then I’ll get down on my knees and pray that they don’t fool us again.” Music has a unique way of communicating.