Weight Watchers International (NASDAQ:WTW) is leveraging the power of celebrity again, desperately trying to light a much-needed new fire under investors. But, it’s not the messaging — or the people delivering it — that’s keeping WTW stock in check.
On Friday, ‘wellness’ company WW unveiled its new “It Works” marketing campaign featuring media mogul Oprah Winfrey. The updated promotional plan aims to highlight some of the success stories members have experienced using the Weight Watchers program. Winfrey — who owns more than 10% of outstanding WTW stock — is even making video calls to some members to celebrate their weight loss. (“You get a call and you get a call!”)
The new campaign, however, still misses the mark the company can’t afford to continue missing.
Case(s) in point? WW posted disappointing fiscal third- and fourth-quarter reports. Last quarter, revenue of $330 million missed estimates of $347 million, and in the quarter before that, the company’s subscriber base fell sequentially to 3.9 million from 4.2 million.
The results are a reflection of multiple headwinds, though each of those headwinds is ultimately rooted in the same challenge… consumers are increasingly empowered by self-service choices, and decreasingly swayed by celebrity endorsements.
Those self-service choices in question are deep and wide, ranging from fitness trackers like Fitbit (NYSE:FIT) to dieting apps (many of which are free) to a wealth of information on the web that’s led consumers to smarter food choices. Organized ‘programs’ have become so yesteryear.
So has Oprah.
As a reminder, this isn’t the first go-around WW has had with Oprah Winfrey. Her involvement first took shape with great fanfare back in 2015, when she became a major shareholder. By December of that year, Winfrey starred in her first Weight Watchers commercial.
Investors loved it, and consumers noticed it. But, surprising as it may be, her celebrity hasn’t had much in the way of staying power. Revenue is up measurably from 2015 levels, but still short of 2012’s peak of $1.84 billion.
Last year’s top line was only $1.5 billion.
The stock has reflected those busted expectations. Shares soared from 2017’s low near $12 to a mid-2018 peak near $102, only to slide back to the current price near $20.
Better competition isn’t helping WTW stock any either. Nutrisystem (NASDAQ:NTRI), employing a stunningly unsophisticated “you eat the food, you lose the weight” marketing slogan, appeals to a crowd that just wants a solution.
In short, the world has changed. Perceptions have changed as consumers are empowered by limitless information, and near limitless choice. What consumers respond to has changed, with a myriad of alternatives to Weight Watchers, or WW, on the table.
That’s largely why the transformation into a wellness company late last year hasn’t gained much traction. It looks and feels like a new slogan that was invented just for the sake of creating a new slogan. What the new-and-improved WW should have been doing is rethinking everything that it is, from the ground up.
Bottom Line for WTW Stock
None of this is to suggest the Weight Watchers brand is doomed. The absolute worst case scenario is a savvy private equity firm acquires the struggling company left with few choices mostly to use the recognizable name. WTW stock investors are still miles away from that sort of possibility, however.
In the meantime though, messages like “It Works” aren’t going to cut it. It’s supposed to ‘work.’ That’s why people pay for it.
What a viable future might look like for WW, or Weight Watchers, isn’t clear. Making an app the centerpiece of a diet won’t work, simply because there are so many of them already. Its pre-packaged foods are giving consumers second thoughts, as people become more leery of any processed foods and gravitate toward fresh, organic options… in many cases delivered as a kit to dieters’ doorsteps. Membership in a group of like-minded dieters? People are losing interest in that idea too, unless it can be done online.
Simply put, the Weight Watchers of the 1990’s can’t be salvaged as-is with some fresh marketing tweaks. It needs to be stripped down to the core and rebuilt from the ground up. That’s something the company hasn’t been willing to make happen and Weight Watchers stock investors have paid the price.
Until it does, WTW stock is a tough name to justify owning.
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, jamesbrumley.com, or follow him on Twitter, at @jbrumley.