Herbalife’s top operating regions ceased to perform well in 4Q 08, primarily due to unfavorable currency impact and decline in volumes. However, going forward, Management expects to focus on volume growth in top markets. Sales growth in Herbalife’s largest market; the US, is expected to be driven by the continued expansion of the Nutrition Club concept and Weight Loss challenge. The Nutrition Club selling concept proved to be beneficial as the company launched a low calorie meal option, selling at US$2, which proved to be popular with consumers seeking a healthier and lower cost alternative to most fast food options. In Mexico, Value Added Tax (VAT) is expected to negatively impact volume growth, as the Mexican government has implemented 15% VAT during August 2008 on certain products, which is likely to impact the import and resale of some of Herbalife’s products. However, the company is expected to focus on the development of new product formulations that are not subject to VAT, gradually allowing the company to shift to volumes which are exempt from VAT. We expect any positive impacts from this transfer to non-taxable products will not be significantly visible during FY 2009. Furthermore, in Brazil, South America’s largest market, sales are expected to experience positive growth, reflecting successful Nutrition Club DMO, partially offset by unfavorable currency impact. However, in Venezuela, the company is facing difficult conditions due to the current volatile economic and political conditions and high inflation. Therefore, to keep pace with rising costs in Venezuela, the company has undertaken price increases, which are expected to result in declining volume growth. However, with strong momentum in place, Herbalife continues to expand in China. During the quarter, the company applied for 5 additional direct selling licenses from the Chinese government, which are likely to be approved during FY 2009. In addition, the company is also implementing Nutrition club DMO in China. Hence, going forward, sales growth in China is expected to be driven by continued new store openings, additional direct selling licenses and introduction of Nutrition Club DMO.

Read the full report free of charge with free to view access to institutional-quality research on 400 companies and over 700 stocks at www.researchoracle.com or purchase a pdf of the full report from the Alacra store

Disclaimer Independent International Investment Research PLC supplies this research via Pronet Analytics.com Ltd. (’Pronet’). Pronet is Regulated and Authorized by the Financial Services Authority (FSA) and registered with the Securities Exchange Commission (SEC). You are reminded that investment advice provided by Pronet is for your general information and use and is not intended to address your particular requirements. Any advice or recommendations contained in this report may not be suitable for you and are not intended to be relied upon by you in the making (or refraining from making) any specific investment or other decision. Such decisions should only be made on the basis of independent advice from an appropriately qualified adviser. Pronet Analytics.com Ltd. and Independent Financial Markets Research Ltd. are subsidiaries of Independent International Investment Research PLC (the ‘Group’). Research analysts working for the Group are subject to stringent confidentiality and security policies and are located in secure-access premises which may be in the proximity of professionals conducting similar work for other firms. The Group is not nor has been nor will be engaged in investment banking and does not make markets in any of the securities covered in this report or have any investment banking relationship with the firm whose security is covered in this report. No employee or contractor of the Group is permitted to personally buy or sell stock in the company covered in this report, and neither the analysts responsible for this report nor any related household members are officers, directors, or advisory board members of any covered company. No one at a covered company is on the Board of Directors of the Group or any of its affiliates. This report is not a solicitation to buy or sell any security and past performance is no guarantee of future results. Copyright © 2009 Independent International Investment Research PLC. All rights reserved.