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Weight Watchers (NYSE: WTW ) CEO Mindy Grossman is one of the most brilliant executives of our time and there are lots of high expectations about what she can do for Weight Watchers stock.
Grossman brought youth to Ralph Lauren (NYSE: RL ), and helped Nike (NYSE: NKE ) sell clothes, before transforming privately-owned HSN into a celebrity-driven, high-end brand .
Now she's doing what even Oprah Winfrey couldn't do and turning Weight Watchers stock around by focusing on wellness, not just weight loss . For this she reportedly made $33.4 million in 2017 . Based on the Weight Watchers stock performance she is worth every penny.
Over the last year Weight Watchers stock is up 62%, against an S&P 500 gain of 15%, and quarterly revenue has jumped from an average of $300 million to $400 million, greatly exceeding street estimates. Her brand makeover has also begun positioning the company for further gains.
Weight Watchers Stock and the Grossman Effect
Weight Watchers stock has been hot ever since Grossman's appointment was announced in April 2017. At the time the stock, which filed for a $100 million IPO in 2001 , was selling in the mid-teens, and had a market cap of just over $1 billion. Today it is worth $4.6 billion and sits in the S&P's Midcap 400.
Grossman says her personal mission is "passion, purpose and impact." When she joined, Weight Watchers needed all three. It was stuck with a reputation for yo-yo dieting, with pre-packaged and portioned meals, promises to make women look sexier, and celebrity spokesmen like Duchess of York Sarah Ferguson.
Oprah Winfrey promised a turnaround in 2015, investing $43.5 million . Her entry gave the stock a pop, but the price was well below that high when Grossman came aboard.
Grossman offered clients a more holistic approach than just eating , reformulating its packaged foods to get rid of sugar and artificial dyes, launching a meal kit called WW Healthy Kitchen, enhancing the tech program, and launching wellness festivals.
She has also focused on other aspects of wellness, like mental well-being, giving members points for doing physical activity that let them eat more.
The company has also expanded its program in men's health, adding director Kevin Smith to its roster of brand ambassadors after he suffered a heart attack in February.
It hasn't been smooth sailing. Many investors expected immediate, spectacular results that Grossman wasn't promising. The stock price peaked June 1 at over $100, tanking after subscriber growth fell , and losing 30% of its value during that time.
Weight Watchers is next due to report earnings Nov. 5, with analysts estimating sales at $378 million and profits of 99 cents per share, about $66 million. That would be short of the second quarter figures, although the third quarter is often slow for weight loss, given that summer ends and people put on clothes to hide their figures.
As our Karl Utermohlen reports, the stock has been rising as some investors speculate Grossman's makeover will cause the company to outperform those estimates.
That opinion is not unanimous. Goldman Sachs (NYSE: GS ) analyst Jason English, who has recently made bearish calls on such stocks as Hersheys (NYSE: HSY ), Clorox (NYSE: CLX ) and Campbell's Soup (NYSE: CPB ), thinks growth may slow as heaviness becomes more acceptable .
The Bottom Line on Weight Watchers Stock
I'm a reporter, not an analyst. I glance at numbers but I'm more interested in the jockey than the horse.
Mindy Grossman is an excellent jockey. She has a great track record. She has been on board at the company for just 15 months and is only now getting it positioned the way she likes it. Most football coaches succeed best in their second year on the job.
My hunch is you can speculate on Weight Watchers. Just celebrate your success in a healthy manner.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family , available now at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn . As of this writing he owned no shares in companies mentioned in this article.
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