Herbalife Nutrition Ltd. (HLF - Free Report) has delivered a marvellous bull-run in the past six months. This nutrition solutions provider has seen its shares rally 53.2%, against the industry’s decline of nearly 3%. Let’s delve into the factors that are most likely to continue driving this Zacks Rank #2 (Buy) company.
Herbalife remains committed toward its seed-to-feed strategy. This includes making considerable investments in quality check, product testing, scientific workforce and expanding the level of self-production in the company’s premium products. The seed-to-feed strategy is based on using superior ingredients along with vertical solid quality manufacturing of Herbalife’s most renowned products. Further, it involves checking the finished products for label claim and purity, and efficiently delivering these products to members and their customers. To this end, Herbalife remains committed to resonating with evolving consumption trends and offering increased product access points near its members and their customers.
Investments to Enhance Direct Selling
Herbalife has been gaining from its direct-selling network. Management believes that offering one-on-one personalised services acts as a major sales driver in case of nutritional products, especially products related to weight-management. Thus, the company continues to make investments in technology (deal with Salesforce.com), education and training to help distributors enrich their services to customers. Markedly, distributors are an exclusive point of difference for Herbalife, as it helps the company stand apart, and get a competitive edge over traditional and online retailing of nutritional products. These factors along with Herbalife’s robust brand portfolio and geographic spread fuelled the company in the first quarter of 2018, alongside encouraging management to raise view.
Solid Q1 & Outlook, U.S Volumes Up
Herbalife delivered first-quarter 2018 results, wherein both top and bottom lines increased year over year and marked their second consecutive beat. While earnings were driven by robust sales and tax gains, sales were backed by contributions from new products and strength across most regions, apart from China. Also, U.S. volumes returned to growth, ahead of plans. Though volumes in North America rose just 0.2% year over year, it fares much better than declines witnessed in the past few quarters. Clearly, management’s efforts to keep pace with consumers’ preferences and its effective direct-selling strategy are paying off. Encouragingly, the company expects these improved trends to continue in the second quarter and it expects U.S. volumes to be higher than expected throughout the year.
These factors along with the company’s continued focus on its growth strategies encouraged management to raise 2018 outlook. Herbalife now expects 2018 net sales to advance 9-13%, while volumes are expected to rise 3-7%. Further, management expects the bottom line in a range of $2.53-$2.73 per share (on a post-split basis).
All said, we expect Herbalife to keep its stellar show on and sustain the solid bull-run.
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