Herbalife (HLF) shares plummeted 7.57% in pre-market trading on Thursday, following the release of its mixed Q1 2025 earnings report and a price target cut by Citigroup. The global nutrition company faced challenges in key markets, despite some positive developments in its business strategy.

Citigroup lowered its price target for Herbalife from $13 to $11, while maintaining a Buy rating on the stock. This adjustment came after the company reported net sales of $1.2 billion for Q1 2025, down 3.4% compared to the same period last year. The decline was primarily attributed to a 4% drop in North American sales and a significant 14% decrease in China.

Despite the overall sales decline, Herbalife reported some positive metrics. The company's adjusted EBITDA of $165 million exceeded guidance, and its gross profit margin improved by 80 basis points to 78.3%. Additionally, Herbalife achieved a milestone by reducing its total leverage ratio to 3 times, nine months ahead of schedule. The company also highlighted a 16% year-over-year increase in new distributors, marking the fourth consecutive quarter of growth in this area. However, investors seem to be focusing on the challenges faced by the company, including ongoing foreign exchange headwinds and low conversion rates at US Nutrition Clubs, leading to the sharp stock price decline.