May 8, 2023
It’s official, Jenny Craig has closed its doors, and will not be transitioning to an e-commerce model, as it had indicated last week. Operations in Australia, however, will remain open.
Last week, Jenny Craig had alerted employees to potential mass layoffs as it begins “winding down physical operations” and hunts for a buyer, according to communications the weight-loss company sent some staffers this week.
The company said it “has been going through a sales process for the last couple of months,” according to a document titled “Jenny Craig Company Transition FAQs” that was dated Tuesday and provided to NBC News.
According to Bloomberg Law, Jenny Craig Inc., backed by H.I.G. Capital, was considering a bankruptcy filing if efforts to find a buyer for its assets fail, according to people with knowledge of the situation.
“Like many other companies, we’re currently transitioning from a brick-and-mortar retail business to a customer-friendly, e-commerce driven model. We will have more details to share in the coming weeks as our plans are solidified,” CEO and President Mandy Dowson told Bloomberg.
The struggling diet company was in months-long discussions with its lenders to re-work roughly $250 million of debt. Miller Buckfire & Co. has been running a sale process on behalf of the company.
On Friday morning, April 28, after NBC News reported on the layoff warnings, a Jenny Craig spokesperson said that the company “is embarking on the next phase of our business to evolve with the changing landscape of today’s consumers. Like many other companies, we’re currently transitioning from a brick-and-mortar retail business to a customer-friendly, e-commerce driven model. We will have more details to share in the coming weeks as our plans are solidified.”
The company said it “has been going through a sales process for the last couple of months,” according to a document titled “Jenny Craig Company Transition FAQs” that was dated Tuesday and provided to NBC News. Several Jenny Craig staffers said the company alerted them in recent days about potential layoffs.
The FAQ document said: “While we had to issue Warn Notices specifically for sites where we had more than 50 people potentially impacted, this will likely impact all employees in some manner.
The company, based in Carlsbad, California and founded in 1983, was acquired by H.I.G. Capital, a $55 billion private equity firm, for an undisclosed amount in April 2019. It operated about 500 company-owned and franchised stores in the U.S. and Canada as of its acquisition. The company had about 3,000 employees as of December 2022.
Commentary
Marketdata has been saying this for years now, that it’s becoming increasingly difficult to maintain a large system of retail, “bricks & mortar” commercial weight loss centers. Operating costs are high, and managers have to deal with high staff turnover. The pandemic hurt many commercial centers, who could not see as many clients in person. and had to shift to more virtual services. Now, with the soaring demand for prescription obesity drugs, that was the straw that broke the camel’s back. Competitors such as Weight Watchers and NutriSystem and Medifast will no doubt benefit by the loss of a significant competitor. That’s $300-400 million in revenues that will be up for grabs now. We are surprised, however, that someone in the industry did not make some kind of a deal to acquire Jenny’s assets (customer lists, for example, or convert the food operations to a retail brand). There is value to the brand name, built over 40 years. We might still see something happen.
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