A Weight Watchers Belly Flop!

February 14, 2014 by Paul Ausick

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Source: Thinkstock
Nutrition is not having a very good Valentine’s Day. Weight Watchers International Inc. (NYSE: WTW) is getting crushed after mixed results and a weak outlook, and GNC Holdings Inc. (NYSE: GNC) is taking a beating after missing estimates and offering its own soft outlook. Herbalife Ltd. (NYSE: HLF) has dropped a little as well, while Nutrisystem Inc. (NASDAQ: NTRI) has managed to post only a fractional loss in mid-morning trading.

Weight Watchers missed earnings per share (EPS) estimates Thursday night and forecast full-year 2014 earnings at $1.30 to $1.60 per share. That was way below a consensus estimate of $2.78. The company’s 2013 full-year revenues were down 6.2% from 2012, and operating income dropped 7%, excluding a U.K. tax settlement that added $14.5 million to the company’s profit. The company plans to “resize its organization” in 2014 and has not yet estimated the cost of doing so.

GNC missed both EPS and revenue estimates when it reported fourth-quarter results after markets closed on Thursday. GNC also forecast 2014 earnings well below the consensus estimate. The company referred to a “challenging retail environment” both to explain last year’s results and this year’s forecast.

Herbalife raised its forecast for fourth-quarter earnings earlier this month, saying it expects EPS of $1.26 to $1.30, up from a previous forecast of $1.11 to $1.15. For the first quarter of 2014, Herbalife forecast EPS at $1.24 to $1.28, below the consensus estimate of $1.40. To sweeten the news, the company boosted its share buyback program by $500 million to $1.5 billion. Herbalife appears to have shrugged off charges leveled against the company by William Ackman that it is a pyramid scheme. Absent any formal investigation, Herbalife appears to have moved beyond Ackman’s charges.

Nutrisystem is in the middle of a turnaround, and there is some chatter that it may be a buyout candidate. Trading at around $15 a share today, the company is well below its 2006 peak of near $74 a share.

Diet and nutrition programs have been hit with slow spending, likely due to the weak economy. Giving up on pricey diet food and nutritional supplements is not hard for all but the fully committed, and attracting new customers is doubly difficult.

Weight Watchers shares were down more than 25% in late morning trading to $22.81, after posting a new 52-week low of $22.35. The 52-week high is $48.63.

GNC shares were down nearly 13%, at $45.68 in a 52-week range of $37.71 to $60.98.