Can Jessica Simpson Save Weight Watchers?

By Douglas A. McIntyre Published Mar 7, 6:51AM EST

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Weight Watchers International Inc. (NYSE: WTW) desperately needs help. Its earnings have been poor enough to drive its stock to a 52-week low of just above $20, down from a period high above $48. The company’s profile with the public was raised sharply as spokesperson celebrity Jessica Simpson showed how much weight she has lost on the Weight Watchers diet system. Now, if only the public corporation can come with some positive financial news to follow on the huge publicity.

The Simpson weight loss ads that the company started to run on television recently have garnered a great deal of news coverage. And her endorsement was, at the very least, enthusiastic. In the commercial, Simpson comments:

When I started Weight Watchers, I didn’t know what to expect at the meetings. It reminds me that we don’t have to do this alone. It’s so much better to have some back-up since we all face similar challenges. I can honestly say I’ve never been happier.

Weight Watchers’ stock has suffered because investors believe it has too much competition. In fiscal 2013, revenue dropped more than 6% to $1.7 billion. Net income was down 20% to $205 million. The company also reported that its critical online business, WeightWatchers.com, had a decline of almost 7% to $1.7 million.

Investor sentiment about the company was reflected in recent analysis from Zacks:

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

One such stock that you may want to consider dropping is Weight Watchers International, Inc. which has witnessed a significant price decline in the past four weeks, and it has seen negative earnings estimate revisions for the current quarter and the current year. A Zacks Rank #5 (Strong Sell) further confirms weakness.

A key reason for this move has been the negative trend in earnings estimate revisions. For the full year, we have seen 5 estimates moving down in the past 30 days, compared with no upward revision. This trend has caused the consensus estimate to trend lower, going from earnings of $2.78 a share a month ago to its current level of $1.41.

Simpson’s contribution to the Weight Watchers’ turnaround will only work if visibility can be bolstered by better results.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.