Calls reflect 2019 end; virus was not yet global
By Rick Redding
Public companies in the direct selling space had a challenging year in 2019, but at the time these calls were held, coronavirus was just taking hold in China. No doubt our next round of earnings calls will paint a dramatically different picture for all public companies, not just direct sellers.
Herbalife Reports Record Year
In his final earnings call as CEO of Herbalife, Michael Johnson opened the Feb. 18 conversation with a message of compassion for the company’s partners in China, who at the time were just beginning to feel the effects of the coronavirus. Johnson, who is retiring as CEO in March, is leaving Herbalife in a good position.
He said that 2019 was a record year for Herbalife, which reached an all-time high in volume points with 6 billion, up from 1.5 billion in 2003. Johnson said Herbalife is now operating in 90 countries and experienced year-over-year growth in 9 of the top 10.
“We have the best business opportunity anywhere, and our distributors are succeeding like never before,” he said.
Johnson attributed the brand’s strength, in part, to its sponsorship of more than 200 teams and individual athletes around the world.
Incoming CEO, John Agwunobi, warned investors of the company’s wariness of the coronavirus outbreak. “The situation in China and around the globe is emerging, and we’re gathering data points and monitoring the market very, very closely,” he said. “The scope and duration of business disruption, and the related financial impact from the coronavirus, can’t be reasonably estimated at this time.”
Herbalife reported that its 2019 net sales in China dropped 15 percent, though it showed positive year-over-year results in Asia Pacific, EMEA, North America and Mexico. The company’s stock price, which had traded at $57.73 last March, had fallen to $32.22 in February.
Tupperware Delays Earnings Call, Releases Statement
On Feb. 25, the day of its scheduled earnings call, Tupperware announced it would delay the call as it investigated “the accounting for accounts payable and accrued liabilities at its Fuller Mexico beauty business.”
Tupperware announced that “the impact of certain financial reporting matters in its Fuller Mexico beauty business” would cost the firm $19 million to $21 million. The market’s reaction was swift, as Tupperware’s stock price plummeted, losing 40 percent of its value and coming to rest below $3.00 per share. It was the continuation of a year-long slide in value, which had been more than $28.00 just a year ago. It peaked in 2013 at $96.00.
Net sales have declined for eight consecutive quarters at Tupperware, which, in addition to food containers, sells beauty and personal-care items.
While it did not hold its earnings call, a company release stated it expected sales to be down 12-14 percent for all of 2019. It cited “continued execution challenges and unfavorable macro-economic trends.”
Last November, CEO Tricia Stitzel announced her resignation just two years into her tenure, immediately after the company’s third-quarter earnings report showed a 14 percent drop in sales, and the company’s stock price had fallen 73 percent since the start of 2019. The company announced it hired a search firm to find a replacement, but the position hasn’t been filled. Christopher O’Leary was named interim CEO last November.
Medifast Stock Prices Continue to Fall
Medifast CEO Dan Chard noted in his Feb. 26 earnings call that the company is redefining the direct selling model, in part by placing an emphasis on growing its customer base of product buyers.
He said the strategy is paying off, “driving long-term sustainable growth and building value for our shareholders while remaining devoted to our mission of offering the world lifelong transformation, one healthy habit at a time.”
The proof is in the numbers—as Medifast surpassed 30,000 OPTAVIA coaches and 500,000 customers.
In the fourth quarter, its revenue increased 17 percent to $170.6 million, and gross profit increased 17.4 percent to $128.1 million.
Chard said Medifast is a leader in the health and wellness space in the U.S., now valued at $230 billion.
Highlights of Medifast’s 2019 include the expansion into Hong Kong and Singapore, and the completion of a new mobile app. Chard also acknowledges challenges that slowed growth in 2019.
“We believe the slowdown in our growth trends is short-term in nature, and we are excited for the additional initiatives we have in store to support our long-range growth plans,” he said.
While Medifast’s earnings call may sound optimistic to investors, its stock price continued its fall, to about half its $159.00 value as recently as last April.
On March 4, Medifast announced that CFO Tim Robinson is leaving the company, effective March 31, and that Joseph Kellerman will serve in the post on an interim basis.
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