For 17 straight quarters, Herbalife Ltd. has experienced sales increases that have beat Wall Street’s projections.
Last quarter was no exception.
The nutritional products company, headquartered in L.A., announced that their Q1 2013 earnings were 10% higher than last quarter’s earnings.
Earnings were estimated at $118.8 million. Sales are at an all time high with $1.1 billion.
Although Herbalife keeps growing, the company has some tough questions ahead.
A former distributor has filed a lawsuit in federal court claiming, amongst other things, that the company operates a pyramid scheme.
In a statement released yesterday, Herbalife’s executives did not mention the allegations. They chose instead to focus only on the earnings.
Michale O. Johnson, chief executive at Herbalife, declared:
“We continue to deliver record results in sales and profitability as our independent distributors successfully execute numerous growth strategies. Obesity and poor nutrition are global public health problems. Our distributors are proud to be part of the solution.”
What is impressive is the fact that these numbers are so high even after Herbalife shares were hit hard last year after David Einhorn, a hedge fund manager, questioned the business model.
It’s worth mentioning that the Q1 reports have not been reviewed by an independent accounting firm, as will be required by the Securities and Exchange Commission.
The lack of an external audit occurred because KPMG is no longer the firm’s auditor. The firm resigned due to allegations made against a senior partner. The partner was accused of using Herbalife stocks in an insider trading scheme.
Although doubts exist, the Herbalife quarterly report stated:
“The company’s audit committee and management believe that the interim financial information presented herein fairly presents, in all material respects, the financial condition and results of operations of the company.”
Until a third party auditor checks the records, the results presented by Herbalife are questionable.