Author Topic: WTW - Weight Watchers International  (Read 69162 times)

gary17

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BTShine

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Re: WTW - Weight Watchers International
« Reply #51 on: October 08, 2013, 10:02:57 AM »
I like WTW.  The reason is 'psychological factors.'  Those being the network affect and critical mass.

Someone can come out with an identical, or even superior weight loss program, but it will be difficult to compete with the meetings that Weight Watchers holds.  They have the critical mass needed for this type of service (similar to Dale Carnegie for anyone that's had the pleasure to take that fantastic course). 

The network affect, and I'm no expert on this topic, helps Weight Watchers because it means that anyone looking for a weight loss service, that comes with counseling, etc. has the logical option of using WW.  Other programs may be available, but WW has a solid program with group meetings that are robust with attendees (enough attendants to be effective).  Once someone feels like they're "part of the group" they're going to stick around WW for a while.  They also get the feeling that the other attendees are dependent upon her, so there's an altruistic element here.  Attendees don't want to quit because "the other members count on me".

My apologies for those thoughts being somewhat scattered.

blainehodder

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Re: WTW - Weight Watchers International
« Reply #52 on: October 30, 2013, 02:49:17 PM »
WTW beats on earnings and revenues... yet way down on suspended div and forward guidance.  Interesting.

LC

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Re: WTW - Weight Watchers International
« Reply #53 on: October 30, 2013, 02:51:18 PM »
Q3 Numbers: http://www.sec.gov/Archives/edgar/data/105319/000119312513418591/d620899dex991.htm

Customer acquisition and retention continues to fall. As does the share price (down ~15% after hours).

Could be a compelling bargain soon.

blaine...I think the issue is revenues (both meetings & internet), meeting attendance/paid weeks, online active subscribers are all down QoQ.

Heck, they even come out and say it: "we expect Q4 revenues to be down low double digits given our continuing negative recruitment trends...While we are working aggressively on both near-term commercial activities and longer-term strategic initiatives, 2014 will be a very challenging year"

Also interesting is that marketing expenses are down about 30% from the same period last year. I'm not sure how they plan on retaining and acquiring customers without marketing to them. They could be gearing up for the New year's recruitment cycle, however.
« Last Edit: October 30, 2013, 02:59:14 PM by LC »
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hellsten

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Re: WTW - Weight Watchers International
« Reply #54 on: October 30, 2013, 10:48:39 PM »
Management doesn't seem to know what they're doing:
Quote
We need to turn this company inside out. Frankly, I'm not sure if it's inside out or upside down, I just know that to win, we need to change. To fulfill our mission, we need to change.

We are working very hard on our 2014 winter season plan and are optimistic they can have a positive impact on our trajectory. That said, we are not currently expecting the wave of free app trials to abate in 2014. In fact, it's likely to be tougher than ever. As such, the revenue pressures affecting our business are not likely to lessen. Based on this, the decline in 2013 enrollment trends could persist into 2014. If our expected negative recruitment trends in the fourth quarter were to persist through 2014, this, combined with a lower starting actives base, would result in a low double-digit revenue decline next year. Clearly, we hope to do better, but we do not expect a return to revenue growth until our strategic initiatives bear fruit.

http://seekingalpha.com/article/1790202-weight-watchers-international-management-discusses-q3-2013-results-earnings-call-transcript

I hope this goes to $20-25, I might be a buyer then.

collegeinvestor

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Re: WTW - Weight Watchers International
« Reply #55 on: November 24, 2013, 12:33:34 PM »
I dont think I would invest in this business--but I might be wrong.

They have negative equity, which is a huge risk to common stock shareholders.
This is a high profit margin business with gross profits of 60% and EBIT margins of 30%. Roughly 1/2 of their revenues (slightly over 900 million come from meetings and they also sell products in these meetings roughly 250 million) The online business was growing. Even if this is a high margin business with network effects they have horrible capital allocation skills which is shareholder destructive---and maybe even company destructive.


This is just my initial scuttlebutt I will continue studying this business. I think the stock has further to fall... but what do I know. If sales keep falling (which management believes will be the case) this is a classic falling knife investment.

Please let me know if you guys have any counter arguments would love to discuss.

jouni1

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Re: WTW - Weight Watchers International
« Reply #56 on: November 25, 2013, 05:35:22 AM »
They have negative equity, which is a huge risk to common stock shareholders.
This is a high profit margin business with gross profits of 60% and EBIT margins of 30%.

why is negative equity such a huge risk? they're making real cash and returning it to shareholders. numbers-wise this reminds me of DTV, which also has negative equity and some risk-averse investors betting big on it.

isn't making loads of cash with no equity better than making the same amount of cash with lots of equity? i have always thought that businesses that can throw off cash without tying up a lot of capital were quality businesses.

LC

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Re: WTW - Weight Watchers International
« Reply #57 on: November 25, 2013, 06:21:59 AM »
They have negative equity, which is a huge risk to common stock shareholders.
This is a high profit margin business with gross profits of 60% and EBIT margins of 30%.

why is negative equity such a huge risk? they're making real cash and returning it to shareholders. numbers-wise this reminds me of DTV, which also has negative equity and some risk-averse investors betting big on it.

isn't making loads of cash with no equity better than making the same amount of cash with lots of equity? i have always thought that businesses that can throw off cash without tying up a lot of capital were quality businesses.

Well, the reason for the negative equity has been buybacks at high prices. So not a great capital allocation decision, but their majority stakeholder wanted liquidity. But I agree, I have no issues with negative equity per-se, as long as it is the result of good business earnings/cash flows.

The issue here is the leverage...they cut the dividend presumably to help cover the debt/interest payments.
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collegeinvestor

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Re: WTW - Weight Watchers International
« Reply #58 on: November 25, 2013, 10:45:22 AM »
I believe that negative equity is a huge risk because there is less safety in the investment. If the cash flows go away, and there is no earning power left, where is your margin of safety?

Fowci

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Re: WTW - Weight Watchers International
« Reply #59 on: November 25, 2013, 10:52:02 AM »
I don't think this has anything to do with the fact that equity is negative, rather than the equity is made up of intangible assets. They could have positive equity and it would potentially be just as illusory.