Weight management, nutritional supplement, and personal care products company Herbalife (ticker: HLF) has been preparing for China to open its doors to direct selling for some time. Here is what management said during yesterday's Q3 2005 earnings results conference call:
The official regulations have been published by the Chinese government which allow for direct selling license applications starting December 1, 2005. Our China management team continue to build our presence attracting distributors licensing products and acquiring real estate locations. We opened seven stores in five provinces Shenzhou, Shandong, Busan, Langding, and Shenzhen. We are planning to open five to ten stores and two additional provinces by the end of 2005.
We developed a unique marketing plan in a collaborative effort with our distributor leadership that's compliant with a new direct selling rules.
We expect 2006 to be another investment year in China as we plan to expand our presence to approximately 20 provinces. In 2005, we anticipate an EBIT loss of 4 to $5 million in 2006, we currently anticipate a 9 to 10 million EBIT loss as we build out our stores and expand our infrastructure to support future growth in China. We expect capital investments in 2005 and 2006 to be approximately $15 million. We remain very conservative in our outlook for China as we gain better understanding of the regulations and build a business to compete effectively in this marketplace.
(Quotes are from the CCBN StreetEvents transcript.)
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