Downtown-based Herbalife Nutrition Ltd. last week named former distributor and current company president Stephan Gratziani as its next chief executive, starting on May 1. He will succeed Michael Johnson, who will end his third stint as skipper; Johnson will become the company’s executive chairman.
In addition, the company announced that Rob Levy will assume the post of president of worldwide markets, also on May 1. Levy has spent the last 30 years at Herbalife, holding a variety of positions; he is currently managing director of international markets.
News of the chief executive transition after market close on Feb. 19, combined with a stronger-than-expected earnings report, was a booster shot in the arm for Herbalife investors, who sent shares soaring 43% on Feb. 20.
Prior to this surge, shares had plunged more than 50% since peaking above $12 on July 31; the nutrition products company has been grappling with sluggish sales growth and higher-than expected costs.
Johnson implemented a restructuring last year, including laying off hundreds of employees at its downtown headquarters and its Torrance facility, selling and then leasing back that Torrance plant, improving training for its distributors and promoting social media networking among its distributors.
According to a company spokesman last summer, these moves were expected to yield annual savings of $80 million starting this year.
But the promise of savings from restructuring did little to encourage investors as the stock continued its general downward trend.
The company is now pinning its recovery hopes on Gratziani, a former Herbalife independent distributor for 32 years before joining its corporate staff in August 2023 as chief strategy officer. He was promoted to president in January of last year.
In remarks to analysts immediately following the transition announcement and the company’s earnings release, Johnson stressed Gratziani’s background as a Herbalife distributor.
“Years ago, I entertained the idea of bringing the distributor into the executive team of Herbalife,” Johnson said. “After my unsuccessful attempt in 2011, we succeeded in bringing Stephan aboard as chief strategy officer in 2023. The impact was immediate. Through his and his colleagues’ implementation, we reversed the post-Covid years recruiting decline and reduced the decline in our top line.”
Gratziani focused his remarks on Herbalife’s global reach. The company’s distributors sell its nutrition products – including protein shakes, snacks and other diet and nutrition supplements – in more than 90 countries around the globe.
“As the world’s largest active and lifestyle nutrition brand, the impact we have made in the world is truly incredible,” he said. “Our scale and reach globally puts us in a unique position to become one of the world’s most important health and wellness platforms.”
Gratziani elaborated on this in the earnings conference call, saying he would focus on expanding the company’s digital platform, among other things.
“Herbalife is destined to become one of the world’s most important health and wellness platforms,” he said. “You will start to see this expressed more and more through our digital tech stack, our products and our services.”
Is three times the end?
For Johnson, this transition marks the third time he is saying farewell to the Herbalife chief executive role. His first – and longest – stint at the top was from 2003 to 2017. During that time, the company nearly quadrupled sales and expanded its operations around the world from 58 to 94 markets. He also oversaw the process of bringing nearly two-thirds of the company’s product manufacturing in-house.
But the last portion of his first tenure as chief executive was dominated by an epic battle with billionaire New York hedge fund activist investor Bill Ackman, whose Pershing Square Capital Management firm in 2012 placed a $1 billion short bet that Herbalife stock would plunge to near zero. Ackman maintained that Herbalife’s multi-level marketing platform was in essence a pyramid scheme that was doomed to fail.
Johnson vigorously defended Herbalife’s business model and kept growing the business. And another billionaire investor, Carl Icahn, who was Ackman’s longtime nemesis, took the opposite position in Herbalife, eventually buying up 26% of Herbalife shares. In 2018, Ackman folded his bet and took a loss of roughly $1 billion.
Johnson stepped down as chief executive for the first time in 2017, handing the reins to Richard Goudis, who had been chief operating officer. But Goudis’ tenure ended abruptly in 2019 after the company learned of controversial comments he had made prior to becoming chief executive. The board brought Johnson back as interim chief executive.
In early 2020, just as the pandemic was slicing into Herbalife’s business, the board chose as the company’s next chief executive John Agwunobi, a former federal public health official.
But Agwunobi was unable to propel the company out of the pandemic-induced sales slump and he left in October 2022, prompting Johnson’s return for his third stint as chief executive.
Revenue down slightly, but earnings way up
Simultaneous with the chief executive transition announcement, Herbalife reported fourth quarter and full-year 2024 earnings.
For the fourth quarter, the company posted $1.21 billion in revenue. That was down slightly from $1.22 billion in revenue for the same quarter in 2023. However, Herbalife adjusts the revenue for fluctuations in global currency valuations; on that basis, revenue was up 2.7% for the quarter compared to the same quarter the previous year.
The revenue figures came in at the high end of the company’s guidance and ahead of many analysts’ estimates.
Net income for the fourth quarter was $178 million, way up from $10 million for the same quarter a year earlier. In late 2023, Herbalife was incurring millions of dollars in restructuring costs.
For all of 2024, Herbalife reported $4.99 billion in revenue, down slightly from $5.06 billion for 2023. Net income was $254 million, up substantially from $142 million for 2023.
