Weight Watchers reported huge losses yesterday but not where investors would like to see them. Quarterly revenue dropped 21%, sending its stock skidding 27% in extended trading, Reuters reports, and “undermining hopes that new investor and media mogul Oprah Winfrey would help boost sales.”
Active subscriber numbers dropped 4.8% to 2.39 million for Q4 2015 that ended Jan. 2 (but that’s an “an improvement from being down 12.7% for Q3 2015,” the company points out) and it had a net loss of $11.3 million compared with net income of $4.4 million, a year earlier.
Weight Watchers also “projected a steep first-quarter loss as it ramps up marketing to recruit new members,” reportsFortune’s John Kell. “Executives indicated that revenue wouldn’t rebound much for 2016.
To be fair, the company only revealed Oprah’s involvement on Oct. 19 and introduced its holistic “Beyond the Scale” and “SmartPoints” program on Dec. 7, which “revamped its eating guidelines, placed more emphasis on fitness and offered new motivation tools,” Ellen Byron reports for the Wall Street Journal.
President and CEO Jim Chambers maintained in a statement that the shift “is resonating with consumers” and said the partnership with Winfrey “is off to a strong start.”
“Our transformation momentum is building, with positive recruitments this winter season setting a solid foundation for revenue growth and increased profitability,” Chambers added.
On a call with investors, Chambers referenced “a recent report by Indiana University School of Medicine researchers that showed that the Weight Watcher program with a pre-diabetes-specific component helps adults with pre-diabetes lose more weight and have better blood glucose control program than if they tried to lose weight on their own,” reports Jana Kasperkevic for The Guardian. “Such ‘science-based evidence’ could help Weight Watchers break into the ‘corporate wellness market,’ said Chambers.”
Weight Watchers’ difficulties are indicative of a broader transformation driven, as so many things have been, by the smartphone, which users are tapping on at the rate of 253 times a day, according to a study released earlier this week.
“Within the massive $64 billion U.S. weight loss market, pockets of weakness have been pegged to weight loss centers and low calorie/diet foods,” Kell observes. “That can partly be attributed to the proliferation of smartphone apps, which can help track calories and movement and reduce the need for some consumers to visit a physical center and talk to a coach.”
“[Weight Watchers] new program may strike potential customers as not much different from the old,” Michael Hiltzik observes for the Los Angeles Times. “Dieters tend to be return customers, since taking weight off and keeping it off is extremely difficult; but they're also always on the lookout for a new approach that carries a new type of pixie dust.”
You’d think there also might be a generational evolution involved with Weight Watchers’ woes. Budgeting points throughout the day is “a supremely mommish habit if there ever was one,” suggests Corrie Pikul for Yahoo! Style.
“And then there are those meetings: part group therapy, part kaffeeklatsch, part doctor’s checkup. Few young professionals want to take time out of the workday to clap for a stranger’s half-pound loss.” But guess what? “If you look up the brand’s members on Instagram, there’s hardly a gray hair in sight.”
That may be because 41% of Instagram users are between the ages of 16 and 24, of course, according to Craig Smith’s data dive on DMR.
Besides taking about a 15% stake in the company, including options, and joining its board, “Winfrey, 62, began appearing in ads endorsing Weight Watchers in December,” Nick Turner writes for Bloomberg Business. “One of the clips — which she posted with the tweet “Eat bread. Lose weight. Whaaatttt?” — focused on her love of bread. Winfrey said she has lost 26 pounds.”
“This is the joy for me,” she says. “I love bread.”
Despite the projected Q1 losses, “executives said response to Ms. Winfrey has been strong and Mr. Chambers predicted the company would increase both revenue and active subscribers in the current year,” the WSJ’s Byron reports.
But one thing that’s clear is that Weight Watchers cannot revive on Oprah’s enticing message on bread alone.