Oprah Winfrey is the creme de la creme as far as celebrity spokeswomen go. So if she can't revive Weight Watchers, nobody can -- and that's a real possibility.
The larger-than-life media personality and billionaire recently bought 10 percent of Weight Watchers, joined its board and now graces our TV sets regularly in a commercial that feels more like a mini motivational TED talk than a sales pitch ("If not now, when?" she implores). On certain women's stations, ads seem to rotate between only hers and Nutrisystem's. It's that time of year -- probably the most crucial for weight-loss businesses.
But if she's out to revive Weight Watchers' fortunes, Oprah has a lot of convincing to do.
Shares of the weight-loss program have fallen about 75 percent from their May 2011 high. That was the last year the stock posted a gain. It was also the year that Weight Watchers was supposed to make its comeback from the recession, with more people enrolling online and attending meetings. And men were supposed to be a big growth opportunity for the company, so it spent a bunch of money on ads targeting them.
That year, Weight Watchers' net income topped $300 million on a GAAP basis for the last time, according to data compiled by Bloomberg. The average projection for this year is $48 million. Revenue is so far forecast to stabilize (thanks to Oprah), but that's after the 21 percent drop estimated to have occurred in 2015. In its most recently reported quarter, active subscribers fell 12.7 percent from a year earlier to 2.57 million.
While Weight Watchers may have gained one high-profile backer, it has one growing disadvantage, and it has to do with technology.
The most downloaded free app in the Apple Store on Christmas? Fitbit, the fitness tracker. And the Fitbit Charge -- a wristband that measures activity, calories burned and other gauges of health and well-being -- was among the three most popular items ordered through Amazon Prime's free same-day delivery. Add to that Jawbone (I went for that one) and Garmin's fitness tracker. They're all new competitors for Weight Watchers, which is the last thing it needs.
But wait, those watch things are for people who are just really into fitness rather than trying to lose weight, right? Not necessarily. Wearable fitness devices, just like many fitness magazines and other products, are about aspirations. And many of these devices come with apps that allow users to log their food. If you're interested in just the basics -- calories consumed and burned, caloric breakdown and a food score -- these systems are almost on par with Weight Watchers. And Weight Watchers is shifting its strategy slightly to focus on people being healthier as opposed to just dropping pounds.
Its program does offer a lot of features for those who want them: Meetings with other Weight Watchers members, recipes, food products, more detailed weight-loss progress, personal coaching, etc. But that's all for a price. Some people may also desire the ability to automatically track steps, heart rate and calories burned, and for that, Weight Watchers has no product offering. (Its own online store lists the Fitbit Flex, Fitbit's most basic wristband, among best-selling items.)
And Weight Watchers' stock valuation is about as rich as a chocolate cake. At 14 times projected Ebitda for this year, that's a higher ratio than the Standard & Poor's 500 Index's average of 11. In fact, shares of Alphabet (Google) are even slightly cheaper than Weight Watchers. Not to mention, Weight Watchers has quite a bit of debt -- $2.2 billion -- for a company that generates only about $250 million of annual Ebitda. Moody's rates it B3, junk status.
It will take time to know whether Weight Watchers can justify the valuation investors are currently paying. But it's hard to see how Weight Watchers can remain relevant without more innovation. A huge ad push still may not be enough, even if it is Oprah talking.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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