Usana Health Sciences plunges on poor first quarter

Posted Mar 28th 2008 1:42PM by Zac Bissonnette
Filed under: Bad News, Scandals

Shares of Usana Health Sciences (NASDAQ: USNA) are down 25% after the company reported lower than expected first quarter sales, and forecast a drop of 20% in full-year earnings.

In the press release announcing the results, Usana blamed "disappointing results from new promotional and incentive activities, economic uncertainties in the U.S., as well as the lingering effects relating to negative misinformation about the company that appeared in the mass media during 2007."

The "negative misinformation" referred to consisted of a series of reports produced by ex-con turned fraud investigator Barry Minkow, who alleged that the company was operating an illegal pyramid scheme. While the SEC ended its investigation of the company without taking any action, the company's lawsuit against Minkow has not gone so well.

A court tossed out 4 of the company's 5 claims against Minkow, with Judge Tena Campbell saying that the company failed to demonstrate that Minkow's claims were false, writing that their arguments of defamation revolved around "hypertechnical statements representing differing interpretation of data."

Minkow told the Salt Lake Tribune that "The message from this case is if you have accurate information and you don't break the law and you can corroborate your findings, you don't have to fear retribution from the company."

So here's my question for Usana: If Minkow's claims were "negative misinformation," why can't you rebut the substance of his report?

In an email, Minkow told me that he believes that "the credit crisis prevented people from dumping overpriced vitamins or failing business opportunities on their credit card and the same will occur with Herbalife (NYSE: HLF)."

Tags: Minkow, Usana, USNA