After Earnings, The New Weight Watchers Still Looks Familiar


When WW, the company formerly known as Weight Watchers International (NASDAQ:WTW), was founded back in 1963, its premise of empowerment was game-changing. It was practically impossible for dieters to know exactly how their diet was affecting their weight.

The notion of empowerment has never really gone away. Indeed, the advent of the internet — and mobile internet in particular — has cultivated a culture of empowerment. “There’s an app” for that isn’t just a cliche. Every bit of the world’s collective knowledge is literally at your fingertips.

And there’s the rub for current and prospective owners of WTW stock. It’s still the big name in weight-loss regimens, but empowered dieters can all too easily bypass WW and achieve the same on their own.

Investors were reminded of this reality on Tuesday evening, when a disappointing fourth-quarter report was followed by an even more disappointing 2019 outlook.

A Rough Start for Weight Watchers

Oppenheimer analyst Brian Nagel on-target with his assessment following the WW earnings report. His take? “I think they tripped over their own feet as they made this big transition from Weight Watchers to WW … from a weight loss company to a wellness type company.”

The strategy isn’t wrong. Indeed, wellness has supplanted shapes and sizes as the yardstick most consumers use, with the assumption that healthy diets and healthy lifestyles will result in the weight that’s “right” for each and every individual.

But, in overhauling what it is in October of last year, WW largely alienated its core crowd. That is, overweight consumers struggling to connect the dots between wellness — or at least the idea of wellness — and weight loss.

The numbers tell the story. Last quarter’s top line of $330 million fell short of the $347 million analysts were expecting. Earnings of 46 cents per share of WTW stock missed estimates of 60 cents per share. Worse, this year’s revenue will only roll in at roughly $1.4 billion, according to the company, coming up short of the $1.66 billion the pros had been modeling. WW’s full-year profit guidance of between $1.25 and $1.50 per share is less than half analysts’ estimated figure.

CEO Mindy Grossman explains “we had a soft start to 2019 versus last year’s strong performance with the launch of WW Freestyle.”

That “soft start” can have a lingering effect. Most of its recruitment takes place during the first quarter, after a string of food-focused holidays prompt weight-loss-minded New Year’s resolutions. WW is starting the new year with a smaller base of members to monetize than it was expecting.

And yet, to simply chalk up fiscal headwinds to a questionable overhaul may greatly oversimplify what truly ails WW.

WTW Stock Missing the Target (and the Point)

In short, WW remains rooted in a marketing approach, and shtick, that doesn’t resonate with consumers anymore.

The aforementioned idea of empowerment can’t be emphasized enough. Consumers, overweight or not, are more empowered now than they’ve ever been. But that empowerment largely supersedes what WW (no pun intended) brings to the table. At the very least, point-based diet apps that are just as powerful as WW’s are available for free, but more than that, consumers are now willing and able to custom-build their own personal menus based on the internet’s wealth of information about a particular food’s pros, cons and nuances.

And, as it turns out, the pre-approved, pre-packaged food WW sells may facilitate weight loss, but many dieters note they’re packed with preservatives and sodium — a step away from the “wellness” the new WW is touting.

It’s not just about alternative apps and access to prepackaged foods with healthier ingredients though. WW’s marketing is increasingly out of touch with its average customer … a 48-year-old female that may or may not be willing to learn to use an app, and a woman that may not have time to regularly attend meetings.

That’s not to suggest spokespeople Oprah Winfrey and Kate Hudson are unrecognizable names. They’re stars. But at 65 years of age and out of mainstream cable television loop for years now, Winfrey’s not exactly a “closer” for any would-be dieter not yet convinced WW is a viable solution.

As for the perpetually fit Kate Hudson, she connects even less with frustrated overweight consumers.

Looking Ahead for WTW Stock

Can Weight Watchers, or WW, be salvaged? Maybe. Its brand awareness is second to none to be sure. That still counts for something.

If WTW stock is going to put itself back into a longer-lived uptrend, however, it’s going to have to distinctly do something else than what it’s presently doing.

One such solution is a 180-degree turnaround from its current “system-based” approach to something more akin to the NutriSystem (NASDAQ:NTRI) message. Its “you eat the food, you lose the weight” marketing message may be stupidly simple, but many consumers crave simplicity … men in particular.

To that end, WW continues to ignore that half of the market. While men aren’t dismissed altogether, 90% of its customers are women.

Another potential initiative that could rekindle WW, and by extension, WTW stock: A deliberate move all the way to the extreme end of the “wellness” spectrum, where it said it was refocusing in October.

Oppenheimer’s Nagel agreed that last year’s rethinking of what weight loss is really all about was a step in the right direction, in an environment where consumers are more interested in wellness than a number on a scale. But as far as a true “wellness” company goes, the new WW still looks and feels a lot like the old Weight Watchers. Customers haven’t been fooled. They’re still using the web to find the true wellness information WW isn’t providing, often learning in the process that WW-branded food isn’t necessarily all that good for you.

Maybe paradigm shift is in the works, but between last quarter’s numbers and this year’s outlook, WTW stock owners have good reason to fear WW still doesn’t understand where it fits into the current landscape.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site,, or follow him on Twitter, at @jbrumley.

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