Shares Sink as Herbalife's CEO Steps Down

- November 2nd, 2016

Nutraceutical company Herbalife will soon have a new leader at the helm. The news follows mixed Q3 financial results and has already had a major impact on share value:

Nutraceutical company Herbalife (NYSE:HLF) will soon have a new leader at the helm, as CEO Michael Johnson steps down in June 2017. The news follows mixed Q3 financial results and has already had a major impact on share value: in after hours trading on Tuesday, Herbalife’s stock fell close to two percent.
Are investors sorry to see Johnson go? The CEO has an impressive resume: appointed chief exec in 2003, he quadrupled Herbalife’s annual net sales and worked to expand the company’s operations internationally. He also guided Herbalife through a lengthy legal investigation—which some people now suggest may have influenced his decision to step down.
Investor Bill Ackman, who holds a short stake in Herbalife, has long labelled the company a pyramid scheme. This year, his accusations led to an official investigation by the Federal Trade Commission (FTC). And while the FTC did not include the phrase “pyramid scheme” in their official report, they did require Herbalife to adjust its business model and pay a US$200 million fine.

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The investigation may be partly responsible for mixed Q3 results: the company’s net income fell six percent to US$87.7 million. Revenues, however, are on the rise—they increased by two percent compared to this time last year.
Meanwhile, Johnson says that Ackman’s allegations—and the resulting investigation—were not a factor in his decision to step down as CEO. Instead, he told CNBC that “[n]ew blood is important. We have a great exec waiting in the wings.”
That executive is current COO, Richard Goudis. He has been with the company’s senior management team since 2004 and is largely responsible for Herbalife’s decision to manufacture most products in-house. He takes the CEO seat in June of next year, as Johnson transitions into his new role as executive chairman of the nutraceutical company.

Don’t forget to follow us @INN_LifeScience for real-time news updates.
Securities Disclosure: I, Chelsea Pratt, hold no direct investment interest in any company mentioned in this article.
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