Weight Watchers Bets a Brand Overhaul Can Extend Oprah’s Rally

(Bloomberg) -- Weight Watchers is betting its future on two letters.

The health-and-wellness company is changing its name to WW, as Chief Executive Officer Mindy Grossman tries to draw more consumers to the weight-loss program in a bid to extend the momentum fueled by Oprah Winfrey’s embrace of the brand nearly three years ago.

Weight Watchers, which has been updating its technology and reshaping its diet plan, becomes the latest company to embrace its initials. And as Grossman puts her stamp on the brand, she’s pulling from a playbook used at Home Shopping Network, where she mounted a turnaround at the company that had switched its corporate name to HSN.

"We will go through a period where people will have to understand Weight Watchers reimagined," Grossman said in an interview last week at WW headquarters in Manhattan.

Weight Watchers Bets a Brand Overhaul Can Extend Oprah’s Rally

As part of WW’s move to focus on overall health, the company is launching a program in the U.S. next month where members earn rewards including products for tracking meals, activity and weight. The WW app will be updated on Oct. 4, and starting in January 2019, WW products sold directly to consumers will have no artificial sweeteners or preservatives. WW shares are up less than 1 percent, after earlier falling as much as 1.7 percent.

Cyclicality

There’s mounting pressure on Grossman to prove she can sustain the Oprah-fueled turnaround. The company’s shares have gained nearly 60 percent this year, after surging almost 300 percent in 2017 as advertisements featuring the well-known media mogul helped bring customers back to the weight-loss program after a difficult stretch that saw the company’s shares sink below $4 in 2015.

Shares of WW took a hit in August after the company posted second-quarter results, causing a 15 percent selloff the next day. While WW reported profit that topped estimates, the full-year guidance and subscriber forecast drew concern from SunTrust analyst Michael Swartz.

Grossman stands proudly behind the quarter’s results, noting the number of subscribers in the quarter increased by 1 million from the year-ago period. "I think its ultimately educating people that yeah, we have growth, but there is some cyclicality to the business," she said.

Winfrey took a stake in the company and agreed to pitch the brand in October 2015, sending the shares flying. At the time, Weight Watchers was heavily in debt, and suffering through subscriber losses amid the rise of fitness apps. Grossman succeeded Chief Executive Jim Chambers in July 2017.

Now, in her reshaping of the company, Grossman’s changes include a new product look to reflect the updated design of WW. And she’s taking a page from her time at HSN, where she turned the company from a staid shopping channel into a lifestyle brand, transforming its image from an outlet known for pushing products like the Suzanne Somers ThighMaster. The TV shopping network was acquired by QVC’s parent company Liberty Interactive, in a $2.1 billion deal earlier this year.

"What Mindy has done with the brand has been nothing short of a phenomenon," said Morningstar analyst RJ Hottovy in a phone interview. "She turned Weight Watchers from being a liability to an asset."

WW has garnered interest from a number of new analysts this year, with nine firms initiating coverage, according to Bloomberg data. Weight Watchers has nine buys and five hold ratings with an average price target $100. Not one analyst is bearish on the company, which traded Friday at more than $69 a share.

Oprah’s Presence

Investors are placing a lot of faith in Grossman’s ability to transform the company but they are also watching Oprah’s moves very closely. Back in January, WW rose as much as 15 percent amid talks of "Oprah for President." The shares quickly slipped after Oprah shut down the rumors weeks later.

It’s unclear what role Oprah will play in the upcoming advertisements during the key diet season. Grossman gave no indication on the faces of the winter ad campaign but she did mention that WW has been very engaged with Oprah and the other influencers.

The company relies on the winter season to draw in subscribers who have made New Year’s resolutions to lose weight.

"We are working right now on exactly what that (campaign) will look like going into 2019," said Grossman. "It’s all under concept development, globally."

©2018 Bloomberg L.P.