Finance News

Weight Watchers Jumps as New Freestyle Program Fuels Growth

By Nick Turner  and Craig Giammona

• Updated weight-loss system helps company outpace Nutrisystem
• Company also got one-time boost from federal tax overhaul

Weight Watchers International Inc.’s new Freestyle program, which lets members eat as many beans and eggs as they like, is giving it an edge over rival Nutrisystem Inc.


The weight-loss company backed by Oprah Winfrey posted stronger-than-expected earnings last quarter -- and gave an upbeat forecast for the coming year -- after the Freestyle rollout attracted more customers. That sent the stock up as much as 10 percent to $77 on Wednesday.

Nutrisystem, meanwhile, is facing headwinds after a marketing flop during the key diet season. Advertising that ran after the New Year’s holiday was hurt by lower ratings on CNN and Fox News. The company’s shares had slipped 40 percent this year through Tuesday, pulled down by an earnings forecast that fell well short of Wall Street expectations.

The Weight Watchers comeback began when Winfrey bought a stake in the company and agreed to pitch the brand in October 2015. In addition to the marketing boost from the media mogul, upgrades to the Weight Watchers program are helping drive the turnaround, Chief Executive Officer Mindy Grossman said in an interview.

“We’re moving from just talking about weight to all of health and wellness,” she said. “That’s very different than just selling things to people.”

Stock Surge

The shares, which nearly quadrupled in 2017, are off to a strong start this year. They’d already gained 58 percent through Tuesday’s close.

Earnings amounted to 37 cents a share in the fourth quarter, excluding a tax benefit. Analysts had projected 31 cents. Revenue came in at $312.5 million, compared with an average estimate of $309.5 million.

The company got a one-time boost of more than $50 million from the new tax law signed by the Trump Administration, which allowed it to remeasure deferred tax liabilities.

The New York-based company expects earnings of $2.40 to $2.70 a share this year. Analysts predicted $2.28. It sees revenue approaching $1.55 billion, compared with an estimate of $1.44 billion.

In addition to adding subscribers in the U.S., where Winfrey has been featured in the company’s advertisements, the business is also growing in markets like France and Germany. That’s a sign that Winfrey alone is driving customers to the new program.

“There’s momentum across the board,” Grossman said.