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Weight Watchers (WTW) Misses Q2 Earnings, Stock Down
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Shares of Weight Watchers International Inc. (WTW - Free Report) fell 5.3% to close at $10.79 on Aug 5, following the company’s dismal second-quarter 2016 results. The company reported earnings of 46 cents per share, which missed the Zacks Consensus Estimate by 3 cents and declined 6.1% from the year-ago quarter.
Revenues were flat (up 0.7% at constant currency) on a year-over-year basis at $309.8 million, which also lagged the Zacks Consensus Estimate of $319 million.
Service revenues increased 0.5% (up 1.1% at constant currency) to $251.6 million, which was fully offset by 2% decline (down 1.1% at constant currency) in products sales revenues that totaled $58.2 million.
Gross margin expanded 55 basis points (bps) on a constant currency basis to 51.9%, primarily due to improved meeting cost leverage driven by higher volume.
Adjusted operating income increased 4.6% at constant currency from the year-ago quarter to $73.7 million. Adjusted operating margin expanded 90 bps on a year-over-year basis to 23.8%.
Subscriber and Paid Weeks Metrics
Worldwide subscriber (refers to Meetings members and Online subscribers who participate in recurring billing programs, such as Weight Watcher's monthly commitment plans for its Meetings business) increased 5% year over year to 2.9 million.
Meeting subscribers (monthly commitment plan subscribers, "pay-as-you-go" members, Total Access subscribers and other meetings members) increased 6.6% to 1.3 million.
Online subscribers (Weight Watchers Online, Weight Watchers OnlinePlus, Personal Coaching and other digital subscription products) totaled 1.7 million, up 3.8% from the year-ago quarter.
Total global paid weeks were up 4.2% year-over-year in the second quarter with Meetings paid weeks up 5.5% and Online up 3.1%.
End-of-period subscribers in North America increased 8.6% on a year-over-year basis. Total North American paid weeks grew 8.1% on a year-over-year basis.
Segment Details
North America total revenues increased 5.7% from the year-ago quarter. On a constant currency basis, Meeting fees were up 9.6%, while Online revenue was down 3%.
Product sales and other revenues were up 10.9%. Meeting paid weeks increased 11.9%, and online paid weeks increased 5.2% in the reported quarter.
The United Kingdom continued to underperform in the quarter due to intensifying competition. On a constant currency basis, total revenue declined 9.4%, with meeting fees down 5.4% and online revenue down 9.5%.
Meeting paid weeks declined 5.7% and Online paid weeks declined 9.2% from the year-ago quarter.
Overall Continental Europe trends improved to some extent sequentially, but remained below the year-ago quarter level. On a constant currency basis, total revenue declined 9.8% with meeting fees down 11.1% and online revenues down 4.1%.
Meeting paid weeks declined 6.1%, and online paid weeks increased 0.4% in the reported quarter.
Guidance
Weight Watchers continue to expect year-over-year revenue trends to improve in the second-half 2016. Management now expects full-year 2016 revenues to be slightly lower than the earlier guidance of $1.2 billion. Foreign exchange is forecasted to affect revenues by $15 million.
Total end-of-period subscribers are anticipated to be up in the mid-single digits in the third quarter. Total global paid weeks are expected to be up in the mid-single digits for both the third quarter and for the full-year 2016. Meetings are forecasted to outperform online.
In North America, Weight Watchers anticipate full year revenues to be up in the high single digits exhibiting continued strength in the back half of the year.
In the UK, management expects revenues for the full year to be down in the low double-digits on constant currency, displaying the challenging competitive environment.
Weight Watchers expect gross margin expansion of over 100 bps for the full year, primarily reflecting cost efficiencies at higher volumes.
Marketing spending is forecasted to be approximately $35 million for the third quarter. For full year 2016, marketing expense as a percentage of revenues is expected to be almost flat on a year-over-year basis.
Zacks Rank & Key Picks
Weight Watchers has a Zacks Rank #3 (Hold).
Better-ranked stocks include Nutrisystem , Abiomed and Masimo Corp (MASI - Free Report) . While Masimo sports a Zacks Rank #1 (Strong Buy), both Abiomed and Nutrisystem carries a Zacks Rank #2 (Buy).
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Weight Watchers (WTW) Misses Q2 Earnings, Stock Down
Shares of Weight Watchers International Inc. (WTW - Free Report) fell 5.3% to close at $10.79 on Aug 5, following the company’s dismal second-quarter 2016 results. The company reported earnings of 46 cents per share, which missed the Zacks Consensus Estimate by 3 cents and declined 6.1% from the year-ago quarter.
Revenues were flat (up 0.7% at constant currency) on a year-over-year basis at $309.8 million, which also lagged the Zacks Consensus Estimate of $319 million.
Service revenues increased 0.5% (up 1.1% at constant currency) to $251.6 million, which was fully offset by 2% decline (down 1.1% at constant currency) in products sales revenues that totaled $58.2 million.
Gross margin expanded 55 basis points (bps) on a constant currency basis to 51.9%, primarily due to improved meeting cost leverage driven by higher volume.
Adjusted operating income increased 4.6% at constant currency from the year-ago quarter to $73.7 million. Adjusted operating margin expanded 90 bps on a year-over-year basis to 23.8%.
Subscriber and Paid Weeks Metrics
Worldwide subscriber (refers to Meetings members and Online subscribers who participate in recurring billing programs, such as Weight Watcher's monthly commitment plans for its Meetings business) increased 5% year over year to 2.9 million.
Meeting subscribers (monthly commitment plan subscribers, "pay-as-you-go" members, Total Access subscribers and other meetings members) increased 6.6% to 1.3 million.
WEIGHT WATCHERS Price, Consensus and EPS Surprise
WEIGHT WATCHERS Price, Consensus and EPS Surprise | WEIGHT WATCHERS Quote
Online subscribers (Weight Watchers Online, Weight Watchers OnlinePlus, Personal Coaching and other digital subscription products) totaled 1.7 million, up 3.8% from the year-ago quarter.
Total global paid weeks were up 4.2% year-over-year in the second quarter with Meetings paid weeks up 5.5% and Online up 3.1%.
End-of-period subscribers in North America increased 8.6% on a year-over-year basis. Total North American paid weeks grew 8.1% on a year-over-year basis.
Segment Details
North America total revenues increased 5.7% from the year-ago quarter. On a constant currency basis, Meeting fees were up 9.6%, while Online revenue was down 3%.
Product sales and other revenues were up 10.9%. Meeting paid weeks increased 11.9%, and online paid weeks increased 5.2% in the reported quarter.
The United Kingdom continued to underperform in the quarter due to intensifying competition. On a constant currency basis, total revenue declined 9.4%, with meeting fees down 5.4% and online revenue down 9.5%.
Meeting paid weeks declined 5.7% and Online paid weeks declined 9.2% from the year-ago quarter.
Overall Continental Europe trends improved to some extent sequentially, but remained below the year-ago quarter level. On a constant currency basis, total revenue declined 9.8% with meeting fees down 11.1% and online revenues down 4.1%.
Meeting paid weeks declined 6.1%, and online paid weeks increased 0.4% in the reported quarter.
Guidance
Weight Watchers continue to expect year-over-year revenue trends to improve in the second-half 2016. Management now expects full-year 2016 revenues to be slightly lower than the earlier guidance of $1.2 billion. Foreign exchange is forecasted to affect revenues by $15 million.
Total end-of-period subscribers are anticipated to be up in the mid-single digits in the third quarter. Total global paid weeks are expected to be up in the mid-single digits for both the third quarter and for the full-year 2016. Meetings are forecasted to outperform online.
In North America, Weight Watchers anticipate full year revenues to be up in the high single digits exhibiting continued strength in the back half of the year.
In the UK, management expects revenues for the full year to be down in the low double-digits on constant currency, displaying the challenging competitive environment.
Weight Watchers expect gross margin expansion of over 100 bps for the full year, primarily reflecting cost efficiencies at higher volumes.
Marketing spending is forecasted to be approximately $35 million for the third quarter. For full year 2016, marketing expense as a percentage of revenues is expected to be almost flat on a year-over-year basis.
Zacks Rank & Key Picks
Weight Watchers has a Zacks Rank #3 (Hold).
Better-ranked stocks include Nutrisystem , Abiomed and Masimo Corp (MASI - Free Report) . While Masimo sports a Zacks Rank #1 (Strong Buy), both Abiomed and Nutrisystem carries a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>