Weight Watchers Surges as Oprah Ads Lure Dieters to Programs

(Bloomberg) -- Weight Watchers International Inc., the diet company backed by Oprah Winfrey, surged on Wednesday after the company issued a better-than-expected profit forecast for 2017 and added subscribers for the fourth consecutive quarter.

The shares jumped as much as 38 percent to $19.86 in New York, the biggest intraday increase since November 2015. The stock had already gained 26 percent this year through the close of trading Tuesday.

Weight Watchers had struggled before announcing in 2015 that Winfrey purchased a stake in the company and agreed to act as a spokeswoman for the brand. Since then, the media magnate has buoyed the company's volatile stock by discussing her weight loss on the program in tweets and television ads.

Weight Watchers had almost $2 billion of debt at the end of last year and the stock is heavily shorted, but the Winfrey-driven marketing push has drawn new subscribers to its programs. Last year was the first time since 2011 that the company added new members over the course of a year, said Chief Financial Officer Nicholas Hotchkin.

“It's a combination of people responding well to the strategy and some really good marketing execution,” he said in an interview. “It's really starting to fuel the financial results.”

Nutrisystem Inc. also posted positive results this week, with fourth-quarter sales and earnings topping estimates.

2017 Forecast

Weight Watchers expects to post profit of as much of $1.40 a share in 2017, while analysts had estimated $1.17. Despite the Oprah optimism, Weight Watchers faces an uphill battle. The company, hit hard by the rise of fitness apps, has seen its stock drop in each of the past five years, with a 50 percent decline in 2016. So far, Winfrey has only managed to boost the shares on a temporary basis.

But there are signs that the company has momentum this year. The shares began rallying Monday after M Science, a data analytics firm, said in a note that new-member signups in January had surged almost 33 percent, the fastest pace in more than four years. The period after the winter holidays, when many consumers make resolutions to lose weight, is key for diet companies. Weight Watchers' ability to attract new members this winter has surprised investors and boosted its stock, said Michael Marrale, chief executive officer of M Science.

“These results completely caught everybody off guard,” he said.

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

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Lisa Wolfson, Kevin Orland