It’s been a difficult time for downtown-based Herbalife Ltd.

In the past year, the company has seen its stock lose roughly half its value and recently laid off hundreds of employees and sold a building in Torrance. Still, the company hopes new products and a training coach will help turn things around.

Since reporting second quarter earnings on July 31, the company’s stock price has fallen 31%.

The stock dropped by 8.5% from a closing price of $12.28 on July 31, the day Herbalife reported its second quarter earnings after the market closed, to a close of $11.23 on Aug. 1.

In the past year, the company has seen its stock fall 53%. The stock closed at $8.45 on Aug. 15.

On July 31, Herbalife reported an adjusted net income of $54.8 million (54 cents a share) for the quarter ending June 30, compared to adjusted net income of $74 million (74 cents) in the same period of the previous year. Revenue dropped by 2.5% from the second quarter of the prior year to almost $1.3 billion.

According to a company spokesperson, Herbalife is focused on supporting it distributors to grow their businesses and their customer base through enhanced leadershio development opportunities.

That includes access to entrepreneurial skills training, as well as  a new mentorship, leadership development and accountability program the company will launch at the end of August to its top distributor leaders in North America and will later expand it into other markets. 

During a conference call with analysts to discuss the second quarter financials, Herbalife Chief Executive Michael Johnson said that it has been “a very interesting” first half of the year.

“We’ve laid off some folks. We’ve reorganized the company,” Johnson said. “We’ve gotten incredibly focused on making sure that every move we make in this company delivers results.”

The company announced in filings from April, May and June with the state Employment Development Department that it laid off more than 700 employees at both its downtown headquarters and Torrance facilities.

Additionally, in filings in September and January, the company reported letting another 206 employees go from the same locations.

The global restructuring plan was designed to bring leadership closer to the markets, streamline the organization and accelerate productivity, the company spokesman said.

“The restructuring program is expected to deliver annual savings of at least $80 million beginning in 2025, with at least $50 million expected to be achieved (this year),” the spokesperson added. 

The Torrance property, known as Herbalife Plaza, at 950 W. 190th St., was acquired last month by Rexford Industrial Realty Inc. The Sawtelle-based real estate company paid $41.3 million for the 9-acre property with an 186,000-square-foot office building.

Herbalife International of America Inc., a fully owned subsidiary of Herbalife Ltd., leased back the property for two years following the sale. It has two six-month options to extend the lease.

The net proceeds from the sale transaction were approximately $38 million, the company said, adding that it expects to recognize a gain of approximately $4 million related to the sale in selling, general and administrative expenses in the third quarter.

“This sale is one way we are responding to the changing needs of our business,” the spokesperson said. “This building in Torrance is one of many we occupy in Southern California, and given our work from home program and overall workforce requirement, we no longer had a need for the space.”

The company plans to use the proceeds for general business purposes, the spokesperson added.

Analysts react to stock changes

Linda Bolton Weiser, a senior research analyst with D.A. Davidson & Co., said in a research note from Aug. 1 that she was raising the price target from $9.50 to $13 and maintaining a neutral or hold rating on Herbalife shares.

She noted in the report that Herbalife spent $59 million on debt reduction during the second quarter and a total of $215 million in the first half of the year.

The company “is still targeting a gross leverage ratio of 3x by the end of (next year)”, she added.

“The CFO (John DeSimone) expects the company to generate (this year) two-thirds of the cash needed to repay the $262 million of 2025 notes,” Weiser said in the report. “He also expects the company to reduce debt by $1 billion over the next 4-5 years.”

Hale Holden, an analyst with Barclays Capital Inc. in New York, asked during the conference call about the company’s plans in regard to paying down the debt.

“Is the expectation that you guys would sort of pay as you go every quarter over the next couple of years and chip away at it or take it more in chunks?” Holden asked.

DeSimone said the company was looking to pay down $1 billion over the next four to five years.

“I think that was that question that’s been coming up is once we pay down the (debt due next year), what are we going to do with that free cash? Are we going to buy back stock?” he asked.

How it pays back the debt will be circumstantial, DeSimone said, adding that it will be determined by the maturities of the debt, what penalties there are for paying it off early and how much cash the company is generating.

“So I’d like to do it quarter-by-quarter to the extent that we can and that the economics work out because the interest costs are pretty high,” DeSimone added.

Training coach being utilized

In a research note from July 28, Weiser said she had attended the Herbalife convention on July 20 at U.S. Bank Stadium in Minneapolis.

The most impressive speaker at the convention was Eric Worre, an entrepreneur in network marketing. Weiser called Worre’s appearance at the convention “a game changer” for Herbalife.

A number of individual senior level distributor leaders had hired Worre as a training coach, which led the corporate leadership to engage him to give access to Herbalife distributors worldwide, Weiser said in the note.

“He said he had never agreed to a corporate-wide relationship, but what convinced him with (Herbalife) was the high degree of alignment among the corporate senior management, shareholders, and distributors in the field,” she added.

In his comments to the analysts, Johnson said that Worre has been working with the company for a little over four months and has already made a positive impact.

“He’s provided hours and hours of training and events around the world, including extravaganzas in (Asia Pacific), Latin America and North America, just to name a few,” Johnson said.

These events – which took place in Thailand, India, Colombia and the U.S. – were the perfect time to get the company’s distributors excited about the broad and diverse range of products it continues to rollout globally, Johnson continued.

“From nutrition and performance products like Herbalife24 creatine and Herbalife protein chips in North America to beauty products like the Vritilife Skincare line in India,” he added.

In her research note from July 28, Weiser called the introduction of the chips and creatine powder “less significant than the launch of the vegan nutrition line last year, but any new product launches drive excitement among the distributors.”