As per media reports, hedge fund manager William A. Bill
Ackman sent a letter to its investors continuing to blame
) for improper recruiting methods. Ackman, who is the founder and
CEO of hedge fund Pershing Square Capital Management LP, told his
clients that Herbalife is likely violating multi-level market
restrictions in China. His findings are currently with the
regulators but are expected to be disclosed to investors
Since the past year, the company has been facing accusations
by Ackman and the Belgian consumer organization Test-Aankoop
regarding its pyramid scheme business model. Ackman has blamed
Herbal Life of running a pyramid scheme business model, i.e.
deceptive marketing practices employed for improving business.
The company was accused of making money by recruiting new sales
people and not from its sales. However, on Dec 3, 2013, a Belgian
court quashed the allegations and stated that the company's sales
model complied with Belgian law.
Moreover, HerbalLife's financial statements have also been
found to be devoid of any discrepancy. Herbalife's UK-based
auditor PricewaterhouseCoopers (PwC) completed the re-audit of
more than three years of financial statements on Dec 16 and found
no material changes to its prior financial statements. Shares of
this Zacks Rank #2 (Buy) company rose about 8% after the
announcement of re-audited results.
Ackman has however stuck to his short sale position on
Herbalife and promised new information regarding the company in
2014. On the other hand, another investor Carl Icahn has been
supporting Herbalife and increased his stake in the company.
The re-audit came after PwC was engaged as Herbalife's new
independent auditor. Herbalife's former auditor, KPMG LLP (KPMG)
resigned in May following insider trading allegations against an
executive of the accounting firm.
Other Stocks to Consider
Some other stocks worth considering in the retail sector
Haverty Furniture Companies Inc
Best Buy Co., Inc.
). While Conns holds a Zacks Rank #1 (Strong Buy), Haverty and
Best Buy Co. carry a Zacks Rank #2.
BEST BUY (BBY): Free Stock Analysis Report
CONNS INC (CONN): Free Stock Analysis Report
HERBALIFE LTD (HLF): Free Stock Analysis
HAVERTY FURNIT (HVT): Free Stock Analysis
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