Oprah's Loss Is Weight Watchers' Gain
Weight Watchers investors are back in love with Oprah Winfrey.
The diet company’s stock jumped by about 30% on Wednesday, a day after Weight Watchers wtw reported fourth-quarter revenue increased by 3% to $267 million and said it ended 2016 with 10% more subscribers than the prior year. The company also reported a slim increase in sales for the year after three straight years of declines.
Weight Watchers has attributed the turnaround to their relationship with media mogul Winfrey—she bought a 10% stake in the company in early 2015 and has been a highly vocal advocate for the program ever since. Any time Winfrey makes news about her weight-loss journey, the company’s stock tends to rise. But bad news at times due to an uneven recovery has also led to a yo-yo performance for the stock in recent years.
“The high awareness of Oprah’s success and happiness with the program is helping to revitalize consumer interest in our brand here in North America,” said Chris Sobecki, who is a member of the company’s interim executive team as it looks for a CEO successor after Jim Chambers resigned last year. “Weight Watchers continues to benefit from our collaborations with Oprah. We benefit not only from her active role in Weight Watchers advertising, but also her broader visibility and influence as a role model.”
The dieting industry has long relied on celebrities to boost brand awareness—often touting a public figure’s weight loss program with success credited to the weight-loss program that is endorsing them. Past advocates have included actress and singer Jennifer Hudson and actress Kirstie Alley. In general, when there aren’t celebs hawking weight-loss products, the industry sees a dip in sales.
Lately, there have been struggles for the industry as consumers are less interested in following a strict diet and more often taking a “holistic” approach that includes eating healthier and relying on free nutrition and exercise apps. Obamacare also took a bit out of the commercial weight loss market as the law promotes preventative care for obesity-related services that requires reimbursement for “qualified providers” aka programs run by medical professionals.
But the diet industry is starting 2017 with a new look. Rival Nutrisystem ntri earlier this week reported revenue for the latest quarter soared 18% to $545.5 million, news that sent that company’s shares up in the double digits. CEO Dawn Zier said the company was on track to report a fourth straight year of double-digit revenue growth in 2017, led by the strength of the core Nutrisystem brand.
“We believe the Nutrisystem brand is stronger than ever,” Zier told analysts during a presentation. The company also acquired the South Beach Diet brand a little over a year ago and sees that business driving $20 million to $25 million in revenue this year.
Weight Watchers, meanwhile, relied heavily on Winfrey as it kicked off the 2017 diet season. The company launched a members-only video platform in January that gives users an opportunity to connect with Winfrey more intimately. “The addition of this feature has been enthusiastically received by our members,” said Sobecki.