Nutrisystem Scores Wal-Mart Intro (NTRI, WMT)

Nutrisystem, Inc. (NASDAQ: NTRI) has just announced that has aligned with Wal-Mart Stores Inc. (NYSE: WMT) to allow customers to purchase a Nutrisystem 14-Day Starter Program for the first time in the retail channel.  This will begin rolling out nationwide at more than 3,200 Wal-Mart locations in the first week of October and will also be available on the Walmart.com website.  There is a catch to this deal, but so far we are seeing a very positive reaction in Nutrisystem’s shares.

The Nutrisystem weight loss starter program will be available in the pharmacy area of the local stores.  A card system will be activated to begin home delivery thereafter.  This offer will sell for $148.00.

This is not a full roll-out at Wal-Mart for the full Nutrisystem plan, at least not yet.  Much will depend on how this sells and how much of if it cuts into the company’s sales.  With this being in the pharmacy area, you know what the target group is.  So far shares are up 16% at $17.59 in the after-hours session.

Nutrisystem has been fighting declining revenues.  Last year (2008) revenues were $687.74 million, down from $776.76 million a year earlier.  And unless this deal can change expectations, we show that Thomson Reuters is only looking for $508 million in fiscal 2009 sales and $479.5 million in 2010 revenues.

For this to grossly alter estimates from analysts, it seems that the Wal-Mart deal would need to become a full distribution partner.  The problem there becomes that if people are shopping for Nutrisystem at Wal-Mart and buying other food, then the glycemic diet won’t necessarily hold up and therefore won’t necessarily show any significant results if not strictly followed.

Still, traders are bidding Nutrisystem up on the news.  Shares closed up 3% at $15.08 today, but soared some 16% at $17.48 in the after-hours session.

JON C. OGG