Weight Watchers has massive problems that even Oprah can't fix
Oprah Winfrey/Weight Watchers, Twitter
The diet company recently reported disappointing earnings. Most importantly, paid subscriptions are down.
According to the company's release, active subscribers dropped 4.8% for the fourth quarter. (However, the third quarter was worse - active subscribers had dropped 12.7%.)
The company broke it down.
Fourth quarter revenue decreased by 17.2%, and total paid weeks decreased by 16.8%.
After the bad news was reported, shares plummeted, even though they had initially skyrocketed 105% when Oprah took a stake in the company and then spiked again after she announced she had lost 26 pounds (and that she could eat bread).
This shouldn't be too surprising, though.
"Regardless of how much Ms. Winfrey contributes to the marketing of Weight Watchers, a well-designed new program is necessary for the company's success," Barclays analyst Meredith Adler wrote in a note to clients when Oprah announced her stake in the company.
So while "I eat bread every day" resulted in with a hit marketing campaign, it might not have done much more.
Her personality can't hook subscribers, because ultimately, Weight Watchers has several problems that no celebrity can mask.
"Weight Watchers has some significant business challenges that will not be solved alone - by even the most resolute celebrity," University of Southern California marketing professor Jeetendr Sehdev said to Business Insider in October.
Firstly, with so many free apps like MyFitnessPal and cheaper apps like iTrackBites, people have more affordable options - why pay when they can lose weight for free?
Dave Smith/Business Insider
Dave Smith/Business Insider
Secondly, the results are dubious, at best. In 2014, Duke University executed a study comparing various retail-based weight loss regimes. Arguably, paying lots of money for a weight loss program would result in serious commitment, but the results did not come out in Weight Watchers' favor.
Those who participated in Weight Watchers spent an average of $377 a year - for an average loss of just 5 pounds.
That said, Weight Watchers had launched new programs, SmartPoints and Beyond The Scale in December, which aim to mitigate some of the problems earlier versions of the program had. These new initiatives focus on providing members with a "personalized approach" to dieting, including an app called FitBreak and a focus on nutrients, not just calories. The company believes this program is resonating with consumers.
"With the launch of Beyond the Scale and SmartPoints earlier this winter, we introduced an entirely new Weight Watchers program, which is resonating with consumers," Jim Chambers, the Company's President and Chief Executive Officer, said in a release. "The partnership with Oprah 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."
Is it, though? There may be some greater trends in the industry overall that Weight Watchers cannot fight.
NPR reported in January that the diet business as a whole is suffering, for two major reasons - one, people were accepting their bodies as they are, and two, they are focusing on wellness, as opposed to dieting. Dieting just isn't in anymore.
"Dieting is not a fashionable word these days," Tufts University nutrition and psychiatry professor Susan Roberts said to NPR. "Consumers equate the word diet with deprivation, and they know deprivation doesn't work."
True, Oprah has her bread (every day), but Weight Watchers might just be associated with dieting. And more importantly, they might not even want to focus on the number on the scale anymore.
"Consumers are not dieting in the traditional sense anymore - being on programs or buying foods specific to programs," Mintel analyst Marissa Gilbert said to NPR. "And there's greater societal acceptance of different body sizes."
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