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Weight Watchers Plummets on Profit Forecast at 50% of Estimates

Aviel Brown and Craig Giammona
Weight Watchers Plummets on Profit Forecast at 50% of Estimates

(Bloomberg) -- Weight Watchers plummeted after a severely disappointing full-year forecast, so it’s turning again to the name that fueled its last rally: Oprah.

The wellness company that’s been rebranding itself as WW tumbled as much as 34 percent late Tuesday after warning member recruitment will decline in 2019. It’s targeting profit between $1.25 and $1.50 a share this year, a far cry from the $3.36 analysts had been estimating. Revenue will be about $1.4 billion, below the nearly $1.7 billion projected.

Weight Watchers acknowledged that its marketing campaign during the key winter diet season failed to resonate, and it said it plans to lean more heavily on Oprah Winfrey in its upcoming ads. Winfrey, who owns more than 8 percent of the wellness company, joined in October 2015 as an adviser and board member, and her star power helped fuel an impressive run-up in market cap from about $400 million before Winfrey disclosed her stake to a high of more than $6.8 billion last summer.

Winfrey has stayed involved in the company, and she did the voiceover on a recent campaign. But she hasn’t been as front and center in marketing materials as she once was. The company is going to change that: Chief Executive Officer Mindy Grossman noted that the celebrity will “play a central role” in an upcoming marketing campaign. Winfrey’s chief of staff recently joined Weight Watchers as Chief Business Development Officer, too.

“We spend a lot of time together and what you know about Oprah is that she is very discreet about what she wants to do and doesn’t want to do. She’s very excited about our new trajectory,” Grossman said in an interview. “This is something that she wants to put herself against.”

The plan to bring Winfrey back to the marketing in a big way follows a difficult start to the year for the company. Winter is normally the best time for health-focused brands, since it’s when many dieters turn their attention to losing weight after the holidays, but Grossman on the earnings call said that January was a “hard month.”

“January time period is such a critical component of your recruitment for the year. We had to be realistic and transparent about what that meant for the balance of the year,” she said in the interview. About 40 percent of subscribers usually join in the first quarter of the year.

Investors had become accustomed to torrid growth at the company, where shares almost quadrupled in 2017. They lost some ground last year and were down a further 23 percent this year through Tuesday’s close. It’s been trying to regain momentum by expanding tie-ups with third parties, such as Amazon.com Inc. and Blue Apron Holdings Inc.

Still, first quarter revenue will be down roughly $40 million, Chief Financial Officer Nicholas Hotchkin said.

“It’s difficult to recover from this soft start,” he said.

To contact the reporters on this story: Aviel Brown in New York at abrown611@bloomberg.net;Craig Giammona in New York at cgiammona@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Lisa Wolfson

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