What happened

I admit that every time I see Herbalife (HLF 2.00%) in the news, I can't help but smile just a little bit. The name takes me back to the first time I heard about Herbalife, while living and working in Moscow in the '90s, and saw a flyer on a lamppost announcing products for sale from "Gerbil-Life," the closest Herbalife could get to transliterating its name.

Herbalife shareholders, though, are not smiling today because of something the company just announced. Yesterday after the close of trading, Herbalife issued an earnings warning for its fiscal third quarter 2021, and the stock is down 15% in response as of 10 a.m. EDT this morning. 

Downward arrow on stock chart.

Image source: Getty Images.

So what

As the company explained, "lower than expected levels of activity among its independent distributors ... has led to a decrease in expected third quarter and full year net sales." Mind you, Herbalife is still hoping to see its sales grow in comparison to fiscal 2019 (a pre-pandemic road marker that many consumer goods companies are using in lieu of 2020 comparisons this year). But by that metric, sales will only grow about 14% to 18% in the third quarter, and only 19% to 23% for the full fiscal 2021.

Also, sales will be down between 3.5% and 6.5% in comparison to the third quarter of fiscal 2020, and up only 4.5% to 8.5% for the full year versus 2020.

Now what

Focusing on the midpoints, a roughly 5% year-over-year sales reduction in the third quarter implies about $1.45 billion in sales for the quarter, while 6.5% growth for the year implies full-year 2021 sales of $5.9 billion. Both of those numbers will therefore likely miss analyst forecasts: $1.56 billion for the quarter, and $6.1 billion for the year.  

Similarly, Herbalife gave guidance ranges for adjusted earnings per share: about $1.10 for the quarter and $4.75 for the year. Those will likewise miss Street expectations for $1.17 and $4.99, respectively.

Herbalife is doing a bit better than last year, but far worse than Wall Street had forecast, and that's why the stock is down today.