Weight Watchers needs more than just a new CEO. It needs a real business plan, adapted to the changing tastes of a new generation of health-conscious consumers -- and one that goes further than simply anointing Oprah Winfrey as its front woman.
Shares in the weight-management business fell 8 percent Tuesday, following the resignation of CEO Jim Chambers on Monday. The stock was already down 55 percent this year, amid growing doubts about a turnaround plan centered on the celebrity spokeswoman, who took a 10 percent stake in the company and joined its board last October.
Oprah's arrival got investors rallying behind Weight Watchers, bumping its stock price from less than $7 to more than $26. But the stock fell again in the following months, as customers who didn't think the company's products lived up to its Oprah-backed marketing promises dropped out of the program and sales suffered.
Indeed, bets against the company surged in March, with short interest as a percentage of free float reaching 52 percent, its highest point ever, according to Markit. Short interest has retreated a bit since then but remains elevated.
While the company looks for a new CEO, a team comprised of its CFO, former COO and a board member will helm the business. But Weight Watchers needs more than just new leadership.
Revenue declines continued long after CEO Jim Chambers took over in 2013 and promised to transform the company, though he did manage to jump-start the number of new subscribers to the Weight Watchers program.
As my colleague Tara Lachapelle has pointed out, while Weight Watchers floundered over the years, an array of new fitness- and nutrition-tracking options flourished. People are now using Apple watches, Fitbits, and free apps to track calories, food consumption, and exercise. They are following weight-loss gurus on YouTube. The sense of community and accountability found at Weight Watchers meetings is now available on Facebook, Instagram and upstarts such as Bikini Body Guide and Fit Girls.
The company's new app hasn't been compelling enough to convince consumers to pay for what they can already get somewhere else for free. Interestingly, its in-person meetings business still outperforms its online business.
While Weight Watchers has tried to simplify its program and revamp its points system to encourage healthy eating beyond mere calorie-counting, the still-complicated program remains daunting for consumers. At the same time, the changes have confused long-term believers.
Adding to the confusion, Weight Watchers tries to be everything to everyone, with a long menu of options, including its app, in-person and online meetings, personal coaching, and branded food.
All is not lost. The $60 billion weight loss industry is vast, and people are always eager to try out new approaches. But the Weight Watchers product has to be good enough, and different enough from what's already out there, to convince people to pay for it.
With $2 billion in debt, Weight Watchers needs to use each penny wisely. It would be better off saving some of its marketing money and sprucing up its offerings before advertising them and risking more customer disappointment.
One way it could stand out, and add value for customers, would be to create more personalized diet and fitness regimes, beyond just personalizing its dieting app, so users don't have to muddle through myriad confusing options. It could offer meal delivery for super users. It could target under-served groups such as vegetarians, college students and pregnant and nursing women.
And with two-thirds of its business in North America, Weight Watchers has a huge opportunity to tap the growing number of international consumers looking for help adopting a healthier lifestyle, an area where it continues to underperform rivals.
As with most successful diet and fitness plans, such an approach will take more time and effort, but will pay off in the long run.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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