And The Hits Keep Coming For Herbalife And NuSkin

As I continue to document the troubles inside the very troubled MLM industry, there is no lack of fodder to write about. Consider the recent news on Herbalife (HLF) and Nu Skin (NUS).

For a third time, Michael Johnson assumes the role of Chair and CEO at Herbalife, a move clearly to calm investors. You will recall that in a previous stint as CEO, Johnson told a reporter that $1,000 “that’s a lot of money to a lot of people” [see Betting on Zero, minute 36:32], as if it is elitist to sniff at $1,000. Johnson did not mention (though he likely had access to information) that a quick look at the data would show negative earnings AFTER required purchases and expenses for the vast majority of these people. He and investors made millions as Herbalife distributors accumulated loses. This had been going on for years, with no noticeable improvement in the success of those pursuing the “business opportunity.”

After seven years of FTC required monitoring, the picture looks a bit different. Total CEO compensation is down from $86.4M for Johnson in 2011 to $7M for Agwunobi in 2021. And share price declined 63% over the past year. In writing about Herbalife on 10/31/22 Zacks noted, “one reliable measure that can help investors address this [what’s next for the stock?] is the company’s earnings outlook…. Ahead of this earnings release, the estimate revisions trend for Herbalife LTD. Favorable…. the current status translates into a Zacks Rank #2 (BUY) for the stock” The report then goes on to oddly reference CVS, a retail, insurance, and PBM conglomerate, as if they and Herbalife are in the same industry.

The next day “Herbalife puts former CEO back in charge, withdraws guidance.” Wait, Zacks said that company’s earnings outlook is “one reliable measure that can help investors.” Well, perhaps that is correct after all. Rather than good news, going back to Johnson for leadership reminds this “boomer” the lyrics in a rather famous song “If I don’t get some shelter Ooh yeah, I’m gonna fade away.”

Investors in Nu Skin learned that “The top and bottom lines missed the Zacks Consensus Estimate and declined year over year.” Those darn “higher-than-anticipated macro headwinds,” mostly attributed 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 a dividend) perhaps we should take a long-term view. Oh, over the past five years the share has decline 51.7%. All of this brings to mind lyrics of yet another tune, “ Then I’ll get on my knees and pray We don’t get fooled again.” Music has a unique way of communicating.