Shares of multilevel marketing giant Herbalife Ltd. (HLF) fell as much as 5.3% in after-market trading on Wednesday after issuing an earnings forecast that fell short of investor expectations. 

While the nutritional supplements maker posted better-than-expected second-quarter earnings results, it also said that it doesn’t expect sales to grow in the current third quarter. The disappointing forecast also rekindled worries that a regulator settlement will constrict growth. The decline was good news for hedge fund Pershing Square Capital Management and a growing number of HLF short sellers. (See also: Herbalife Scrambles, Hires New Lawyer as Short Interest Booms.)

Forecast: Revenue to Decline as Much as 5%

Herbalife’s Q2 earnings of $1.51 per share well surpassed the Street’s $1.12 consensus estimate and the company’s guidance of $1.05 at the midpoint. Yet since the Federal Trade Commission (FTC) forced the company to revamp its U.S. operations and cough up $200 million to refund its distributors, investors have been keeping a close eye on indicators that new regulations could present a roadblock for the Los Angeles-based firm. As part of the ruling, Herbalife must prove that a majority of its U.S. revenue comes from consumers instead of its distributors trying to reach income payouts.

Investors were disappointed with weak current-quarter guidance, in which sales are expected to come in flat, or down as much as 5%. The Q3 earnings forecast for $0.75 per share at the midpoint also fell short of the $1.20 consensus estimate by a wide margin.

Herbalife’s latest Q2 report and subsequent sell-off provides some relief to Pershing Square's billionaire hedge fund manager William Ackman, who has been waging a war against the nutrition and weight loss company since 2012. Ackman has bet $1 billion on short selling HLF, claiming that the global corporation is an illegal pyramid scheme that wrongfully takes advantage of lower socioeconomic groups and minorities.

Wednesday's drop trimmed a 38% year-to-date increase in Herbalife's share price. (See also: William Ackman’s Crusade to Take Down Herbalife.)