WFM Packs on the Pounds, WTW & NTRI Scale Down
With summer comes the added enjoyment of pools, boats and a whole lot of skin to be shown. As the weather heats up, men and women across the world noticeably drop the winter pounds in an effort to present their most trim selves on the beach. So, why is it that Weight Watchers International (NYSE: WTW) is not doing so hot these days, while Whole Foods Market (NASDAQ: WFM) is seeing profits steadily increase?
WTW has reported sluggish trends that go hand-in-hand with inactive members. Meeting revenues fell 7% as the company's transformation initiative took a backseat to the difficult PointsPlus launch comparisons from last year.
Management lowered guidance for the pound-shedding business, and with that cue, research firms began to do the same. Wedbush lowered PT from $82 to $68 on WTW, while J.P. Morgan chose to bring down EPS from $5 to $4.65 for 2012 and decreased PT from $88 to $81.
Costs associated with healthcare and remodels did not help matters this quarter. However, it appears that lack of membership was really the driving force behind disappointing earnings.
"Tough year-ago comparisons are also hurting attendance growth, with NA attendance likely down low double digits in H1 despite very favorable y-o-y weather. Net, the short-term question for the stock is really attendance sustainability after a banner 2011, and Q1 results/2012 guidance are likely to stoke fears," Morgan Stanley explained in a report today.
NutriSystem (NASDAQ: NTRI) fought to squeeze in-line with analyst expectations as well, but earnings came up short. Tons of discounts and a disappointing program launch were prompted by an unsatisfactory return to diet season, according to Wedbush. Management reported that revenues for the quarter were $128.5 million, down 3.2% from the first quarter of 2011.
So where is everyone? From the looks of it, they're shopping at the Whole Foods Market. The grocer experienced a quarter that Weight Watchers and NutriSystem could only dream of, reporting EPS of $0.64 with total sales reaching +13.6%. New products and effective promotions helped to drive margins upside and bring in hungry customers.
And it's not just now that WFM is to be victorious. Analysts predict that the company will continue to see triumph, as it commits to intact price investments to further success.
Upper income consumers have drawn a line in the summer sand and judging by earnings calls, food trumps weight watching many times over. However, NTRI and WTW may have a saving grace this season.
NutriSystem is launching a new program called "NutriSystem Every Day" with new products formulated for the retail channel backed by new spokesperson Janet Jackson, and Jessica Simpson recently signed a deal to lose the weight she gained while carrying her newborn daughter, Maxwell, through Weight Watchers.
As it has been widely publicized, the $3 million contract has Simpson set to become a spokesperson for the struggling company as she works to lose weight for not only her health, but for her wedding to fiancé Eric Johnson. Watching celebrities quickly snap back into shape has always been a motivator for America, and this new campaign is sure to be no exception.
Consumers will always battle the food vs. weight ratio, regardless of season. While it appears that many have decided to chow down rather than hit the scale, this simple fact does not mean that WTW and NTRI won't turn around in coming quarters with the assistance of a new advertisement campaigns. With a sandwich in hand, stay glued to your televisions and be prepared to be motivated by surely remarkable slim-downs!
Latest Ratings for WTW
|Mar 2015||Credit Suisse||Downgrades||Neutral||Underperform|
|Mar 2015||Morgan Stanley||Downgrades||Equal-weight||Underweight|
|Jan 2015||Credit Suisse||Maintains||Neutral|
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