Herbalife Declines After Outlook Renews Fears About FTC Accord

(Bloomberg) -- Herbalife Ltd. declined as much as 5.3 percent in late trading after delivering a disappointing forecast, renewing concerns that a settlement with regulators will hamper its growth.

The nutrition company said on Tuesday that it doesn't expect sales to grow in the current quarter. Earnings also will be lower than analysts had estimated.

Investors have been closing watching Herbalife's results in the wake of last year's agreement with the Federal Trade Commission, which forced the company to revamp its U.S. operations and pay $200 million to refund distributors.

The tepid outlook sent Herbalife shares as low as $63 in extended trading. The stock had been up 38 percent this year through Tuesday's close.

The FTC embarked on its investigation after investor Bill Ackman publicly bet $1 billion against the company's stock more than four years ago and accused it of being an illegal pyramid scheme. Herbalife, based in Los Angeles, has repeatedly denied Ackman's allegations.

The FTC settlement obligated Herbalife to start showing that the majority of its U.S. revenue is generated by consumers. Ackman has said that the company's sales are mostly fueled by Herbalife distributors trying to reach income payouts -- not legitimate demand for its weight-loss shakes and energy drinks.

Herbalife expects third-quarter sales to range from flat to down as much as 5 percent. Earnings will be 65 cents to 85 cents a share, excluding some items. Analysts estimated $1.20 a share.

To contact the reporter on this story: Nick Turner in New York at nturner7@bloomberg.net.

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Jonathan Roeder