Tuesday, July 30, 2013

Herbalife is addressing Bill Ackman's concerns...

Bill Ackman spent eight pages of his presentation (100 to 107 inclusive) covering the issue of shipping surcharges. His argument was that the retail margins were misstated because customers had to pass along a 7 percent shipping charge.

The issue Bill Ackman raised concerned me.

It is pleasing to see that the company is addressing these head on. From page 28 of today's 10Q:

(1)During the second quarter of 2013, we simplified our pricing structure for the North America region by increasing suggested retail prices and reducing total shipping and handling revenues by a similar amount, eliminating a “packaging and handling” line item from our invoices to distributors. We do not expect these changes to materially impact our consolidated net sales and profitability. We anticipate extending these changes to additional markets in future periods.

As a long investor it is encouraging to see perceived deficiencies being appropriately addressed.



Inquisitive Skeptic said...

How are your shorts doing again? ARLP? FMCN?

John Hempton said...

My shorts are doing dreadful. Well many of them. But I am up in the UK, Canada and other jurisdictions on shorts.

How are your shorts doing?

Inquisitive Skeptic said...

How are our shorts doing? Well, Infitialis is a research collective that exposes such fraud and folly in an effort to identify bubbles before they implode and our 100% track record of success speaks for itself!

Aman said...

"our 100% track record of success speaks for itself" - my first impression was that this comment really speaks for itself


Appreciated your "on the ground" look at a Herbalife community in the States, was excellent work and a final catalyst for me finally getting long HLF myself.

One of the rare occasions I've used long-dated call options. As it was always a binary trade (either seriously undervalued or Ackman finds a regulator to get it down to zero), one of the few times I felt risk-reward really benefitted from use of long deriv position.

Anonymous said...

how is that addressing the issue?? As in "we'll take care of that issue by 'making' it go away".

Also, is this across all markets?

IMHO they just lost the opportunity to disclose transparently the pricing structure. I wonder if in a few quarters they will reverse this. All these complicated surcharges allowed for small %point adjustments, and a great way to boost bottom line.

Let's see, simplifying pricing structure is one thing but including all 'surcharges' in the product pricing will "further" inflate the already high priced product. But don't forget the cascading discount system from top to bottom. I'm not entirely sure they accounted for this, as I didn't "digest" the whole release yet.

My 0.02 EUR.


PS: Somebody ought to do a case study on HLF - Bill A., Carl and... JH. This is turning up to be so much fun!

Anonymous said...

I've been down at Coogee Beach, mid-winter, in the glorious sunshine IN my shorts.

I love shorts!

Anonymous said...

John Hempton,
First and foremost I am one of your many fans from Canada.
If you were a brand it would be rare and it is my hope your new employee leverages it to it's fullest potential.
1. honest
2. common sense
3. comprehend faults including his own

Can you or one of your loyal readers provide clarity as to the specific codicil provisions between Soro's Fund Management and Pershing Square Capital Management?

Thank you in advance,

Formula One Enema said...

Hack Man asks SEC to investigate Herbalife longs for collusion.

Not a joke. On Fox Business.

Anonymous said...

I'm not too sure how they have addressed Ackman's point. Firstly, the change only applies to North America even though the line item was global.
Secondly, it just means you have to pay more now for the same product you would have got in the previous quarter for less... doesnt this just prove Ackman's point that the handling charge was deceptive in the first place?

To me, company's recategorising line items like this is never a good sign

Charles said...

I got to agree it doesn't seem that Herblife is fixing the issue. It's only in a certain area and it's not effecting their net sales.

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The content contained in this blog represents the opinions of Mr. Hempton. You should assume Mr. Hempton and his affiliates have positions in the securities discussed in this blog, and such beneficial ownership can create a conflict of interest regarding the objectivity of this blog. Statements in the blog are not guarantees of future performance and are subject to certain risks, uncertainties and other factors. Certain information in this blog concerning economic trends and performance is based on or derived from information provided by third-party sources. Mr. Hempton does not guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. Such information may change after it is posted and Mr. Hempton is not obligated to, and may not, update it. The commentary in this blog in no way constitutes a solicitation of business, an offer of a security or a solicitation to purchase a security, or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author. In particular this blog is not directed for investment purposes at US Persons.