NutriSystem Beats Estimates for Q1

May 1, 2018 - Dawn Zier, President and CEO, stated, “We’re pleased first quarter 2018 revenue and earnings per share exceeded our expectations, driven by better than expected results in Nutrisystem’s direct-to-consumer business. As anticipated, South Beach Diet revenues increased significantly year-over-year, and we remain excited about the long-term opportunity it represents.”

Ms. Zier added, “Our multi-brand strategy, supported by our strong e-commerce and supply chain platforms, has us well positioned in our growing category. Key metrics for both of our brands are sound and continuing to improve, reinforcing our confidence in delivering meaningful growth in 2019.”

Highlights:

  • Revenue was $210.9 million compared to $212.7 million.
  • Gross margin was 53.2% compared to 53.8%.
  • Net income was $2.8 million compared to $7.5 million

Second quarter revenue is expected to be in the range of $186 to $191 million, net income between $23.5 and $25.0 million. Full year 2018 revenue is now expected to be in the range of $693 to $708 million vs. to the previous range of $685 to $705 million, net income between $61.8 and $64.8 million.

The complete Press Release and financial tables can be found here:

https://finance.yahoo.com/news/nutrisystem-announces-first-quarter-2018-200100189.html

Conference Call Information & Marketdata Commentary

Management stated that it expects the firm to return to meaningful growth in 2019, and it plans to launch a new program for the 2019 diet season (no details provided). The company implemented a price increase at the end of the 1st quarter. Reactivation revenues are growing in the single digits. The company expects $70 million in revenues for the South Beach Diet line in 2018, and $34 mill. in retail sales.  NTRI spent heavily on marketing in Q1, with marketing expenses equal to a huge 40.8% of revenues.

Management further reported that the firm has $76 million in cash and short-term investments. They said that they are developing and testing new ads in preparation for 2019. One new thing is that via an analysis of their customer database the firm has found that customers want help with vitamins. So, NTRI plans to introduce vitamin packs as a cross-sell or up-sell, starting in the 3rd quarter. This is in line with the firm's strategy to expand into the wellness space.

Could this be in reaction to Weight Watchers' stated goal of becoming more than a weight loss company and more holistic and wellness-oriented? Weight Watchers' recent momentum HAS to have had a negative effect on NTRI's sales. The fact that NTRI spent 40% of each sales dollar on marketing in Q1 shows that they had to ramp up marketing significantly to foster some demand and growth. It will be interesting to see how the rest of 2018 plays out, as the two giants of the industry continue to do battle. Marketdata aslo thinks that NTRI may need to hire a new female spokesperson for their ads, as Marie Osmond has been around for a long time now. It might be wise to also hold the line on price increases. The addition of a vitamin line will not be enough.

 

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