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Jenny Craig Slide Continues – 101 Centers Closed

Jenny Craig announced that it is closing 101 of its retail stores in North America, and that it will be devoting more attention to its online services (Jenny At Home), "as part of a long-term strategic plan". Closures will be completed by June 28th, and are centers that affect the least possible number of clients and clients will be referred to other centers within a 10- 20 mile radius. Existing clients will be given food discounts if they have to transfer to another center.

These closures bring the number of centers in the U.S. and Canada down to 497 sites. About 195 employees will be terminated and another 400 reassigned.

The company plans to roll out new online tools during the Summer, with more e-commerce and mobile tools available later in the year.

Marketdata Commentary:

Is this the beginning of the end for Jenny? Have they finally realized that maintaining a large network of high overhead centers is too difficult in today's DIY, low-cost diet environment? Are they trying to jump on the high-growth online bandwagon that WeightWatchers.com has had so much success with? Are they too late to the party? We'll see. They will have to create something really compelling online to bring people to their website.

We've said this before, from experience. When large conglomerates take over companies that were successful in their niche (i.e Unilever buying out Slim-Fast), its usually doesn't work out. Unilever did not support the Slim-Fast brand with enough marketing and turned it from a $600 million/year brand into a $180 million/year brand. We think the same outcome is possible with Jenny and Nestle. Nestle also owns Optifast. When was the last time you heard anyone mention Optifast? Unilever is a FOOD company, not a service company, and Jenny's food is just too expensive.

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