Weight Watchers' Rally Is About More Than Oprah, CEO Says

(Bloomberg) -- Oprah Winfrey isn't the only reason for the comeback at Weight Watchers International Inc., which has seen its stock more than triple this year.

That's the view of Chief Executive Officer Mindy Grossman, who points to a broader overhaul at the company -- including improvements to its app -- as helping drive the turnaround.

“I don't want to take away from the value of Oprah, but I also want to acknowledge the technology work that's been done, the operational and structural work that's been done, the marketing work that's been done,” Grossman said in an interview. “I think there has to be more balance.”

Winfrey, a media magnate, actress and longtime talk-show host, joined the Weight Watchers board in 2015 and acquired a 10 percent stake. She also agreed to endorse the company, using her global fame to reinvigorate a brand that had fallen on hard times.

At the time, Weight Watchers had been losing customers for years, hurt by the rise of calorie-counting apps and fitness trackers. Worse, its brand had become dated. The Weight Watchers program, started by self-described “overweight housewife” Jean Nidetch in the early 1960s, was no longer resonating.

When Winfrey began touting the program -- and her own weight loss -- things started to turn around. The company still faces challenges, but Weight Watchers reversed a key benchmark: subscribers. It has posted more than a year's worth of quarterly gains, and second-quarter profit soared past analysts' estimates. The company also boosted its annual earnings forecast on Thursday.

Stock Surge

In the wake of the results, Weight Watchers shares jumped 25 percent to $41.39 on Friday, the highest closing price in four years. The run-up follows five straight years of declines.

Grossman, 59, joined the New York-based company in July after running the shopping network HSN Inc. She took the job after meeting with Winfrey and trying out the Weight Watchers program herself. Now she's tasked with maintaining the company's resurgence.

Grossman notes that Weight Watchers is growing in all its regions across the globe, including markets where Winfrey isn't featured in advertisements. That's a sign the turnaround is being driven by fundamentals, she said.

“I feel really good about what we're building,” Grossman said. “The proof is in the results, and the proof will be in the ongoing ability to execute.”

Lucrative Bet

When Winfrey acquired her stake, the stock was trading below $7. She purchased the 10 percent holding for about $43.2 million. That stake is now worth $264 million, bringing a potential profit of more than $220 million.

Winfrey, 63, has said that her total holdings in Weight Watchers amount to almost 15 percent when options are included. Her total net worth is $3.4 billion, according to the Bloomberg Billionaires Index.

Still, skepticism remains: The stock is heavily shorted, and the company carries about $2 billion in debt. Among four analysts who cover Weight Watchers, three have a hold rating. Only one recommends buying it, according to data compiled by Bloomberg.

Grossman also faces the challenge of taking the helm after a growth spurt. That means it will be harder to keep showing progress in future years.

“I'd rather go into a winning team and make it more successful,” Grossman said. “That's part of my job -- to make people understand this is real.”

To contact the reporter on this story: Craig Giammona in New York at cgiammona@bloomberg.net.

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net.