Is the Oprah Effect Already Wearing Out at Weight Watchers?

Weight Watchers International Inc. (NYSE: WTW) may have enjoyed a massive run higher in recent months from news that Oprah Winfrey was getting involved as a stakeholder and spokesperson, but the effects of that may already be fading into the sunset. That is at least what the stock’s post-earnings reaction may be indicating. Two caveats exist here: 1) there is a very thin number of analysts that actually follow Weight Watchers; and 2) there is a massive short interest.

In the fourth quarter of 2015 it launched its new program and announced its strategic partnership with Oprah Winfrey, but the $259.2 million in revenue was met with end of period active subscribers being down 4.8% — even if that is an improvement from being down 12.7% for the prior sequential quarter. Fourth quarter 2015 revenues decreased 17.2% on a constant currency basis versus the prior year period.

Fourth quarter 2015 net loss was $11.3 million versus net income of $4.4 million in the prior year period. Weight Watchers posted earnings per share (EPS) as a loss at -$0.18, while its adjusted EPS was -$0.03.
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The consensus estimates from Thomson/First Call were $0.02 EPS in earnings and $257.6 million. Before banking those estimates as gospel, there is a very limited field of analysts following Weight Watchers.

Weight Watchers put guidance for 2016 with earnings in a range of $0.70 to $1.00. The thin crowd of analysts following the stock have the consensus at $0.81 EPS. That outlook was specified as being after incorporating the increased share count due the prior equity investment in the company by Oprah Winfrey and related option grant.

Jim Chambers, the president and chief executive officer at Weight Watchers, said of the quarter and the Winfrey partnership:

With the launch of Beyond the Scale and SmartPoints earlier this winter, we introduced an entirely new Weight Watchers program, which is resonating with consumers. The partnership with Oprah Winfrey is off to a strong start. Our transformation momentum is building, with positive recruitments this winter season setting a solid foundation for revenue growth and increased profitability.

Shares of Weight Watchers International closed up 1.2% at $15.55 ahead of earnings and were last seen down almost 20% at $12.50 after the earnings report in the after-hours session. Its market cap is $3.67 to $28.05.