Herbalife (HLF) Barclays 17th Annual Global Consumer Staples Conference summary

Recent leadership and organizational changes

• Leadership changes included the return of a former CEO and appointment of a top distributor as president, energizing the distributor base and shifting strategies.

• Major restructuring reduced organizational layers from 13 to 9, resulting in $80 million in annual cost savings, with most savings realized and further cost reduction initiatives underway.

• Compensation for key executives is now fully aligned with shareholder value through stock appreciation rights.

• Sales have stabilized, with low single-digit declines expected in Q3 and potential improvement in Q4.

• Commitment to increase EBITDA margins by 100 basis points next year, with ongoing focus on margin enhancement and debt reduction.

Distributor trends and growth initiatives

• Distributor count is a key growth driver; new president has revitalized recruitment and motivation through promotions and accountability programs.

• The Premier League promotion incentivizes not just recruitment but also activation and sales by new distributors, with recognition and training as primary rewards.

• Activity levels of new distributors match historical norms, though productivity is about 10% lower, partly due to lowered qualification thresholds.

• U.S. distributor growth has turned positive for the first time in three years, supported by new training and accountability programs.

• Nutrition clubs are being repositioned to focus on community and multiple revenue streams, with training underway to enhance their effectiveness.

Regional strategies and pricing adjustments

• In South and Central America (excluding Brazil and Mexico), a new model lowers consumer prices by reducing distributor commissions, aiming to expand market reach.

• Volume point metrics are normalized for investors to ensure comparability despite changes in distributor compensation.

• The pricing model test in Latin America could be expanded globally if successful, with similar interest from other markets like Indonesia.

• North America remains a sales drag, but new distributor growth and enhanced training programs are expected to drive improvement.

• China, now a smaller part of the business, is piloting a preferred customer program to boost direct sales and data-driven marketing, with early signs of increased transactions.