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Should You Buy Weight Watchers (WTW) As It Launches Meal Kits?

Weight Watchers WTW just announced a new line of retail kitchenware and meal-prep kit offerings as part of a larger goal to expand beyond its membership-based weight-loss program.

Shares of Weight Watchers have skyrocketed over 246% during the last year-a massive resurgence for the once-struggling brand. Some of this growth has been attributed to Oprah Winfrey's presence as a company spokesperson and major investor.

Yet, no matter what caused its recent surge, the rise prompted CEO Mindy Grossman to venture beyond Weight Watchers' traditional business.

Outside the Box Offerings

Weight Watchers is set to unveil its new WW Healthy Kitchen line of tools and products at the 2018 International Home + Housewares Show in Chicago this month. The company then plans to debut this collection of branded kitchenware, which features over 100 items, at retail stores by the end of 2018.

In a similar move beyond its traditional business, the company is also set to introduce Weight Watchers meal-prep kit offerings, which will be available at grocery stores in the second half of 2018. This business expansion comes at a time when the meal-prep kit market has been flooded with new entrants.

Beyond Blue Apron APRN , which has seen its stock plummet do to competition from Amazon AMZN and others, big-box giant Walmart WMT is also a player. Walmart began offering third-party meal-kits last year, and the company just recently started to offer its own pre-portioned kits.

Weight Watchers is clearly starting its plan to become a much larger company, but should investors be worried that this expansion might hurt its bottom line?

Growth Projections

Weight Watchers recently reported fiscal 2017 revenues of $1.31 billion and closed the year with 3.2 million subscribers-a 23% year-over-year surge. The company has made it clear that it hopes to become a $2 billion per year business by the end of 2020, with the goal of expanding to 5 million members. Those are lofty goals, but the company seems to be headed in the right direction.

Looking ahead to the first quarter of 2018, Weight Watchers' sales are projected to climb 14% to hit $375.05 million, based on our current Zacks Consensus Estimates. For the full year, revenues are expected to reach $1.55 billion, which would mark a nearly 19% climb.

Meanwhile, Weight Watchers' earnings are projected to surge over 29% to hit $2.13 per share this year. Investors should also be happy to note that company has crushed earnings estimates recently, with a 42% average surprise in the trailing four quarters.

Bottom Line

Shares of Weight Watchers dipped slightly earlier this week after news spread that Winfrey sold a large amount of stock. But fears that the mogul might try part ways with the company seem to have been quelled for now.

"I am deeply committed to Weight Watchers and continue to see a bright future for the company," Winfrey said in a statement.

Weight Watchers is currently a Zacks Rank #1 (Strong Buy) and is expected to see its EPS figure expand at an annualized rate of 15% over the next three to five years. And this growth estimate could climb even higher once analysts factor in the company's recent expansion initiatives.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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