Amidst ongoing sales difficulties, the chief executive of downtown-based nutrition supplement company Herbalife Ltd. abruptly departed late last month. Herbalife’s board then brought back its former longtime chief executive on an interim basis as it launched a search for a permanent successor.
Out is John Agwunobi, the top-level former government health official who led Herbalife through the pandemic. Back at the helm – at least temporarily – is Michael Johnson, who
was Herablife’s chief executive from 2003 to 2017, a tenure highlighted by the company’s fending off of a five-year short-selling attack on its business model from hedge fund manager Bill Ackman.
Initially, shareholders greeted the news cautiously; Herbalife shares dropped 1% on Nov. 1, the first full day after the announcement was made. But shares were pummeled on Nov. 2, falling $3.35, or 16%, to close at $17.56 a share. That plunge outpaced the losses on the broader markets on Nov. 2, with the Dow Jones Industrial Average falling 1.5% and the Standard & Poor’s 500 index slumping 2.5%.
Pandemic hit to sales
Agwunobi had an extensive career as a senior-level government health officer before joining Herbalife in 2016. He served as Florida’s secretary of health and as an assistant secretary of health in the administration of President George W. Bush. In a subsequent federal post, he helped coordinate the government’s response to pandemics.
At Herbalife, Agwunobi initially served as chief health and nutrition officer. He held other executive roles until taking over as chief executive in March 2020, just as the Covid-19 pandemic struck.
During the initial wave of the pandemic, Herbalife’s manufacturing operations in China were forced to close, hindering sales in that large and growing market.
As the pandemic dragged on, it began to impact Herbalife’s multi-level marketing business
model. According to company statements, many of its product distributors that came on board during the pandemic were unable to get in-person team-building training and then underperformed.
Then Russia’s invasion of Ukraine forced Herbalife to shut down its sales operations in both countries, a move that the company said would cost it $120 million in revenue for the rest of this year.
Despite all these sales difficulties, there was little public evidence to suggest Agwunobi’s job was in jeopardy. The company’s move to dismiss him, effective Oct. 27, came without any public warning. And the Oct. 31 announcement, made in conjunction with the company’s earnings release, contained no explanation for his departure and no comment from him.
As for Johnson, prior to his joining Herbalife in 2003 as chief executive, he served three years as president of several divisions of Burbank-based entertainment giant Walt Disney Co.
In the announcement last month of his return to Herbalife, Johnson referenced “the hard work ahead of us.”
“As interim CEO, my focus will be in two key areas: first, to rebuild sales momentum at Herbalife Nutrition; and second, succession management. I will be working closely with the board to help select and mentor the future leader of the company,” he said in the
earnings call.
