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Bear of the Day

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New Years resolutions haven't been good for Weight Watchers International (WTW - Snapshot Report). The company recently gave disappointing guidance for 2013 as it struggled to recruit new members. Weight Watchers has plunged to a Zacks Rank #5 (Strong Sell).

Weight Watchers is well known for its celebrity commercials endorsing its weight loss plans and its diet foods found in local supermarkets. Each week it holds 45,000 meetings where members receive support from company leaders and others in the program while learning about nutrition and healthy eating.

The company also operates WeightWatchers.com which offers subscription weight management products over the Internet.

Weight Watchers' problems aren't with the web site side of the business. WeightWatchers.com had a strong 2012 fourth quarter. Internet revenues rose 17.7% over the prior year. Online paid weeks were up 18% versus the fourth quarter of 2011.

It was on the meetings side where things slipped. Fourth quarter meeting revenue for North America fell 1.9% due to continued lower enrollment volumes and weakness in the traditional meetings business. Meeting paid weeks and attendance decreased 7.3% and 14.5%, respectively, year over year.

The meetings business is the company's largest segment so the boost on the Internet side can't make up the difference.

Weight Watchers Sees Weakness In 2013

On Feb 13, Weight Watchers said that it was disappointed in its recruitment trends so far in 2013 despite the new year being the big time for New Years resolutions about weight loss and healthy eating. It blamed current marketing as not being effective in the tough economic environment.

Weight Watchers provided disappointing 2013 guidance of $3.50 to $4.00. This was well under the Zacks Consensus Estimate of $4.75.

Not surprisingly, in response, the analysts slashed their estimates for 2013. The Zacks Consensus fell to $3.58 which is at the low end of the company's guidance range.

There's Value But No Growth

Weight Watchers is trading with a forward P/E of just 11.9. While this puts it in the value camp, investors won't see any growth. Earnings are expected to decline 14% in 2013. This is coming off a low growth 2012, where earnings grew just 3.6%.

The diet industry is a competitive business especially with consumers still holding on tightly to their wallets. Weight Watchers is warning that 2013 will likely be a tough year.

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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.

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