Dean Best

Why Weight Watchers has shed sales

By: Dean Best - 17 February 2014 22:49

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Weight Watchers' current plight is symptomatic of two trends.

The US-based group saw its shares plunge more than 27% on Friday (14 February), the day after it posted a drop in 2013 profits and set 2014 earnings forecasts below Wall Street estimates. The fall in Weight Watchers was also just the latest drop; its share price was down by more than 35% in 2013.

How consumers are managing their weight is changing. There is, as analysts at UK industry watchers Leatherhead Food Research have noted, a growing interest in health and wellness more generally over, simply, diet.

"With consumers' personal memories of failed weight loss attempts and with the media delving into the science behind weight loss, diet is becoming a dirty word. Rather than compartmentalising healthy eating to a particular part of their lives, consumers are looking for more balanced approaches to weight loss and weight management," Emma Gubisch, strategic insights manager at Leatherhead, said recently, while outlining her trends to watch in 2014.

And Weight Watchers has also been squeezed by the rise of the Internet, enabling those interested in keeping their weight down to find alternative ways of staying trim. Free, online tools have lured consumers away from companies like Weight Watchers that offer paid-for meetings and subscriptions.

These trends have provided the context for Nestle's sale of the bulk of its own weight management business, Jenny Craig, in November, while there has been talk Unilever could sell Slim-Fast (although the company has declined to comment).

Notably, speaking to analysts on Thursday after Weight Watchers issued its full-year results, which were filed after the closing bell in New York, chairman and CEO Jim Chambers said the start of 2014 had been just as tough.

"The start of the year is proving to be every bit as challenging as we thought, if not more so. The headwinds from free apps and activity monitors have only continued to intensify and are significantly impacting consumers," Chambers said.

Weight Watchers has set in train plans to reduce costs, including lowering its marketing spend. Chambers, however, said the company is looking to "maximise our consumer activation", with re-shot ads, including one featuring US singer Jessica Simpson airing that will air in the US this week.

The Weight Watchers boss said the company also plans to focus on markets "with the highest near-term potential" and, for example, closed its business in China.

However, Chambers admitted Weight Watchers is "seeing softness across all of our large markets".

It faces a challenge in convincing consumers why they should, one, turn to their weight management products and, two, pay for them at all.

 

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