Herbalife’s strong Q3 results good sign for continued heightened demand for supplements
Many in the dietary supplement industry have been wondering what consumer demand might look like after the market distortions caused by the global pandemic have passed. Now that COVID-19 is starting to become something that people will have to learn to live with and to some degree have become accustomed to, will consumers stop reaching as often for an immune health supplement, or other for products aimed as supporting overall wellness? Or will the supplements markets reset at a higher base level than before?
Some of Herbalife’s financial results are driven by dynamics peculiar to the network marketing channel. Nevertheless the company, with its global reach and long line of supplements and meal replacements, has become something of a bellwether for the health of the dietary supplements category as a whole.
Promising returns for entire industry
In a promising sign for the entire supplements industry, Herbalife recored strong sales in its third quarter of its fiscal 2021, Herbalife notched net sales of $1.4 billion, which was a 6% decline over the third quarter of 2020. But company officials were quick to note that those third quarter results represented a 15.5% rise over the same period in 2019.
“Uncertainty in global markets fueled by the ongoing pandemic and the Delta variant has presented challenges in predicting behavior in our channel,” Herbalife CEO John Agwunobi told stock analysts during an earnings call.
“For the quarter, the number of new distributors and preferred customers joining the business was down 19% compared to record numbers of new entrants in Q3 2020, but it was still up 28% compared to Q3 of 2019, excluding China,” he added.
A transcript of the earnings call was posted on the site seekingalpha.com.
Sales in North America declined year over year by 11%. But Agwunobi said considering the two year ‘stacked’ results, sales are up in the region by 38% over 2019. This continues a several year run in which sales in the region have rebounded for MLMs in the nutritional space, following a period of decline in the early to mid 2010s.
Ongoing issues in China
Alex Amezquita, Herbalife’s CFO, said sales were off by 30% in China as the company deals with ongoing changes to the network marketing regulations there. The company has partnered with Tencent and Alibaba in a digital transformation to make the consumer shopping experience easier.
“The government has an initiative focused on healthy weight by 2030. It's important to the economics of China, for their consumers to be healthy. It’s one of their initiatives to actually take down the cost of health care. So I think we fit into a space that solves a real issue for China. We have to all — us and competitors — find out how best now to adapt to the changing consumer environment in China,” Amezquita said.
