Oprah Winfrey will buy a 10 percent stake in Weight Watchers; company official calls the partnership an “incredible powerhouse.”
INTERNET (OCTOBER 19, 2015) (WEIGHT WATCHERS WEBSITE) – Oprah Winfrey will buy a 10 percent stake in Weight Watchers International Inc. according to the company’s website on Monday (October 19), adding her celebrity and consumer appeal to a diet brand that has been shedding subscribers.
Winfrey’s $43.2 million (USD) investment doubled Weight Watchers’ sagging share price, with more than 57 million shares changing hands on U.S. exchanges, the busiest trading day in the company’s history.
The former talk show queen will join Weight Watchers’ board and work to broaden the company’s reach by participating in its weight-loss program. She will document her experience and appear in Weight Watchers marketing, following previous endorsements by singers Jennifer Hudson and Jessica Simpson.
“Weight Watchers has given me the tools to begin to make the lasting shift that I and so many of us who are struggling with weight have longed for,” Winfrey said.
Winfrey, 61, was regarded as America’s most influential celebrity for years thanks to her daily talk show, magazine, book club and production company Harpo.
Her influence has slipped since she ended ‘The Oprah Winfrey Show’ in 2011 after 25 years to launch the Oprah Winfrey Network (OWN) on cable TV. However, she remains one of the richest and most powerful celebrities in the United States. Forbes magazine has estimated her net worth at $3 billion.
The media star will receive options to buy another 5 percent of Weight Watchers.
Weight Watchers was founded in 1961 and in 1997 introduced its ‘points’ food system, a formula that dieters use to determine the value of a food portion based on its calories, fat, and fiber content.
Weight Watchers participants thought the partnership made complete sense at a Weight Watchers meeting in New York City on Monday.
“Here is someone whose life mission, one of her life missions is to help people find their best selves,” Weight Watchers leader Lisa Shaub said.
“And here’s Weight Watchers, who for over 50 years has been trying to help people find their best selves, so the combination is like an incredible powerhouse that’s going to help millions of people and hopefully encourage millions more to get the courage to walk through the door and start their journey to achieve their goals.”
“She is in many ways the biggest, most inspirational voice in the country for self improvement and so many women can relate to Oprah because she’s not stick thin and she’s gone through ups and downs with weight loss and it’s sort of like if she can do that, then we can, but also, even if she fails, I think there’s an inspiration there too, so either way it’s a win-win,” Weight Watchers member Brigitta Delaney said.
“It’s a very good thing, anything Oprah does is good and she’s always got positive things going on,” Weight Watchers member Kim Carrubba said.
“And for me it’s been a very positive thing so it’s just right in line with what Weight Watchers does,” added Carrubba.
Weight Watchers has suffered from a shift in what U.S. consumers consider to be healthy, with shoppers increasingly moving toward natural foods and away from diet products. Winfrey’s frankness about her personal struggles with weight loss may help revive the brand, but analysts said her influence with young people was uncertain.
The company is trying to woo back clients who formerly focused on counting calories but are now more interested in pursuing “health and wellness,” a trend that can encompass everything from consuming more natural ingredients to foods that are high in protein. The switch has pressured sales of products ranging from low-calorie frozen dinners to diet soda.
Winfrey’s endorsement will likely resonate with female consumers over the age of 50, Morningstar analyst R.J. Hottovy said. However, it is unclear how Weight Watchers will bolster its brand positioning with a younger audience, he said.
“It’s a little unclear how this expands the Weight Watchers target audience beyond its traditional over 50 female demographic,” said Hottovy.
“I think a lot of the pressure the company’s been facing has come with the brand losing relevance with the younger demographic and while Oprah seems to have a standing everywhere, it is a little bit difficult to see if this is going to make a meaningful impact with younger demographics and potential future Weight Watchers members.”
Consumers’ recent embrace of calorie-counting apps on mobile phones, and the popularity of wearable fitness trackers such as those made by Fitbit Inc, have made it hard for Weight Watchers to stand out, Hottovy said.
Last year, the company launched an enhanced version of its online subscription with a new around-the-clock expert chat for users. Still, active online subscribers have dwindled to 2.8 million from a four-year high of 3.6 million in March last year.
“It adds a level of credibility and commitment that we haven’t seen from many Weight Watchers endorsement before, particularly if you take a look at Oprah Winfrey taking a seat on the board and taking a 10 percent ownership stake, which could balloon to as much as a 15 percent stake,” Hottovy said.
“But beyond that I think what’s interesting to look at here is given Winfrey’s different print, media and digital properties, whether there might be some cross marketing opportunities with these businesses as well. Also Oprah has a number of investments in health and wellness businesses, which I think it helped to accelerate the company’s transformation from simply being a weight management company to being a more holistic health and wellness operation.”
Winfrey will buy nearly 6.4 million shares at Friday’s closing price of $6.79 per share.
If Winfrey buys 15 percent of Weight Watchers, she will become the second-largest shareholder, after investment firm Invus Public Equities Advisors LLC, which owned a 51.5 percent stake as of June 30.
Weight Watchers stock doubled, last up by $7.86 to $14.69 on the New York Stock Exchange.
Coming into Monday’s trading, the stock had lost 92 percent of its value since a closing peak of $85.76 in May 2011, and for several years attracted a steady flow of short sellers, betting the stock would fall further.
Weight Watchers currently has short interest of about 11.65 percent of shares outstanding, according to Markit, a relatively high amount. That means investors who were betting against the shares might today be in a position where they are forced to buy back the stock.