Herbalife Plunges After Earnings Miss and Disappointing Forecast

Updated from 5:24 p.m. to include additional information pertaining to the FTC legal issues.

NEW YORK (TheStreet) -- Herbalife (HLF) plunged 11.3% to $49.58 in after-hours trading, following the company's third quarter earnings miss and a lower than anticipated fourth quarter forecast.

The nutritional product and weight loss company reported diluted earnings of $1.45 on revenue of $1.3 billion in the third quarter. Wall Street had been expecting the Los Angeles-based company to report earnings of $1.51 on revenue of $1.32 billion. 

"In the quarter we saw volume increases in two-thirds of our 91 countries, especially Russia and China," said Michael Johnson, chairman and CEO in the press release. "Excluding the impact of currency translation in Venezuela, the company had solid increases in both volume and net sales. We continue to implement initiatives that we believe will further strengthen our foundation and drive long-term improvements in activity, productivity and retention of our sales leaders. We are proud of our members' ability to grow the business in the short term while embracing changes that we believe will enhance the long-term opportunity."

The company pointed to pre-tax charges of $139.5 million it took for its Venezuelan assets and liabilities, citing the negative affect of the devaluation of that country's currency in the third quarter. For its fourth quarter outlook, Herbalife said it expects to generate income of $1.30 to $1.40, compared to analysts expectations of $1.69 a share, according to analysts' surveyed by Thomson Reuters

Herbalife notes in its earnings release that its forecast does not include the affects of its legal woes in its business matters or expenses relating to a Federal Trade Commission inquiry. Earlier this year, the FTC opened an investigation into Herbalife's business practices, after complaints were issued by activist shareholder William Ackman, who alleges the company uses a pyramid scheme in selling its products.

On Friday, Herbalife resolved one of its legal entanglements on this topic. It reached a $15 million settlement agreement with the parties who had brought a class-action lawsuit against it, alleging the nutrition product company had engaged in a pyramid scheme to sell its products. Herbalife admitted no wrongdoing in reaching the settlement and it has said it will probably be sanctioned by the Federal Trade Commission -- but not shut down by the regulators. 

--Written by Dawn Kawamoto in San Francisco

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