The Oprah effect has continued to work its magic for Weight Watchers, with the company reporting 1 million more members in a year and revenue up by one-fifth.
Weight Watchers’ shares are worth more than 13 times their value three years ago – shortly before Oprah Winfrey bought 10% of the company and agreed to be its ambassador. The increase is probably the biggest example of the Oprah effect – the former talkshow host and media mogul’s power to boost sales of any product she supports.
It is a transformation that has made Winfrey, already worth about $3bn (£2.3bn), another fortune. Her stake, bought for $43m, had risen to more than $400m even after she sold one-quarter of her shares in March.
In January 2015, Weight Watchers was in the doldrums and its management could not understand why. It was the new year and Americans were meant to be signing up to beat the flab. But nothing happened.
Membership of the company, founded more than 50 years earlier, had been falling for a year even as obesity in the US was rising to record levels. What was wrong?
It turned out US consumers had lost faith in diets – and companies dictating what they should weigh. Instead, consumers wanted wellbeing, which could include losing weight but also exercise and strength, both physical and mental.
Weight Watchers replaced target weights with a broader healthy living plan, including exercise and supported by more emphasis on cognitive thinking.
It also updated its apps and social media to help members improve their general health. Fitness tracking devices now offer FitPoints for activities such as walking, cleaning or dancing, which are used to calculate diet guidance.
Not for the first time, the company contacted Winfrey, whose fluctuating weight was part of the personal story that had made Americans take her to their hearts. Winfrey had rebuffed earlier approaches, but in 2015, she agreed to promote the company, buying its shares and joining the board.
The combination of tuning into consumers’ needs and nabbing the ultimate brand ambassador transformed Weight Watchers’ fortunes. The company piled on members and revenue soared.
On Monday night, Weight Watchers posted results showing a 28% rise in member numbers from a year earlier, to 4.5 million, and total revenue up 20% to $409.7m.
The UK is Weight Watchers’ second-biggest market after North America, but it is growing at about half the pace of the wider group. UK revenue rose 10.5% to $29.2m in the second quarter, and the number of members increased by 15.2% to 383,500. The British business has no celebrity ambassadors since the MasterChef presenter Gregg Wallace stepped aside.
For the past year, the company’s growth has been led by its chief executive, Mindy Grossman, who had turned around the Home Shopping TV channel. The New York Times billed Grossman as the second coming of Jean Nidetch, the Brooklyn-born entrepreneur who founded Weight Watchers in the early 1960s.
Last year, Grossman acknowledged Winfrey’s effect on the company, but said its renewed success was also down to getting things right for its customers. “We’re looking at the future of experiences and how you personalise it. We can inspire people to have healthy habits ... That’s not just about losing 10lbs, but creating a structure you can live within,” she said.
Presenting the results this week, Grossman said Weight Watchers wanted to reach beyond its middle-aged female base to target men. The company has enlisted the producer DJ Khaled and the comedian Kevin Smith, who lost weight after a heart attack, as ambassadors in the US.
Grossman also highlighted the company’s success in encouraging members to recommend a friend on their app – with a 70% conversion rate.
However, the results disappointed some investors. Though member numbers were up from a year earlier, they had fallen by 100,000 since the end of March. Revenue also fell short of analysts’ average forecast, though net income, up from $45.1m to $70.7m, beat expectations. The shares, which had quadrupled in the previous year, were down 14% in early trading on Tuesday.
Alessandro Giudici, a lecturer in management at Cass Business School, said: “They have been doing very well over the last couple of years. The turnaround is thanks to Oprah and the new strategy is delivering. But early this year, we started to see mixed signals because Oprah sold 25% of her shares, and there are question marks over their growth strategy.”
Giudici said attempts to attract men and younger, more affluent female customers could fall flat or even backfire.
“They have been positioned very strongly in serving mass market customers above the age of 35 and Oprah is the right influencer for that market,” he said.
“They are now using influencers to try to tap into this new generation, but they need to keep focused on the mass market. There may be a trade-off. It remains to be seen.”
