Herbalife Ltd. on Tuesday lowered expectations for the coming year after reporting its net income dropped 38 percent in the fourth quarter due to higher expenses and lower sales of its nutritional and weight-loss supplements.

The company's adjusted net income did met Wall Street estimates, but sale growth disappointed.

After the market closed, the Los Angeles company reported net income of $33.7 million (53 cents per share), compared with $53.8 million (77 cents) a year ago. Sales fell 11 percent to nearly $513 million, with the company in part blaming a stronger dollar for dampening sales overseas, which have been its key growth markets in recent years. Selling, general and administrative expenses rose 8 percent to more than $187 million.

Herbalife, which sells its products via direct distributor networks, announced in December that in response to the poor economy it would cut 6 percent of its corporate work force and restructure its business. Excluding restructuring costs and other one-time items, adjusted net income totaled $43.4 million (69 cents).

Analysts survey by Thomson First Call on average expected adjusted net income of 69 per share on revenue of about $543 million.

"We ended the year on a soft note," said Chief Executive Michael Johnson in a statement, citing the weakening global economy, volatile foreign currency markets and softer volume trends in certain key markets.

Net sales in Mexico & Central America fell more than 28 percent and South American sales were off nearly 21 percent. But in China, one of its youngest markets, sales jumped 61 percent.

For the full fiscal year, earnings grew 16 percent to $221 million ($3.36), or $232 million ($3.53) when adjusted for the one-time items. Sales increased 10 percent to $2.36 billion. Analysts expected earnings of $3.54 per share on revenue of $2.39 billion.

Herbalife also lowered its 2009 earnings outlook by 10 cents to a range of $2.90 to $3.10 a share, and now expects net sales to be 5 percent to 7 percent lower than last year.

Despite moderating expectations, Johnson remained upbeat about the company's prospects. "Our business has the potential to thrive during economic downturns because we offer an opportunity for part-time or full-time income along with an attractively priced product," he said.

On Wednesday, Herbalife shares closed down $3.81, or 20.8 percent, to $14.52, on the New York Stock Exchange. Argus Research Corp. downgraded shares to "hold" from "buy" based on the company's expectations for lower volume, revenue and earnings in 2009.

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