Feb. 26, 2018 – Dawn Zier, President and CEO, stated, “In 2017, we achieved accelerated growth for both revenue and earnings. Double-digit revenue growth from both new and reactivation customers was driven by a highly effective ad campaign, media expansion, and increased engagement throughout the customer journey. We also proved out our multi-brand strategy, demonstrating that we have a scalable platform to which we can continue to add brands as the right opportunities present themselves.”
Ms. Zier added, “As we enter 2018, I am pleased with the extraordinary growth of the South Beach Diet, and we believe it’s just getting started. Our Nutrisystem brand had a slower than expected start to Diet Season as our campaign failed to generate more new customers versus last year. Our highly successful creative approach fatigued and we are in the process of revamping the advertising and rebalancing media as a result. We view this as a temporary and fixable setback and anticipate returning to meaningful growth in 2019. All other key metrics around the business are sound and continuing to grow.”
Key financial highlights for the period.
First quarter revenue is expected to be in the range of $204 to $209 million
Full Year 2017 Compared to Full Year 2016
- Revenue increased 28% to $697.0 million, compared to $545.5 million.
- The South Beach Diet brand contributed $27.1 million in revenue, compared to $1.6 million.
- Fourth Quarter 2017 Compared to Fourth Quarter 2016 – Revenue increased 20% to $131.2 million, compared to $108.9 million.
- The company spent $198 million on marketing in 2017 – 28.5% of sales.
Full year 2018 revenue is expected to only be in the range of $685 to $705 million. This is basically flat with 2017 and represent a major slowdown in growth. Q1 2018 revenues are expected to be $204-209 million. The South Beach Diet brand is expected to contribute approximately $70 million in revenue in 2018, up substantially. Reactivation revenues are expected to be up in the mid single digits this year. The company will leverage its database management, revamp ad campaigns, and work on a new program for 2019.
Management, in today’s conference call, says that the situation is fixable, and expects the company to return to double-digit growth in 2019. They claim that the slow start to the 2018 diet season was due to slow new customer acquisitions, a tired and not compelling ad campaign, lower viewership for some stations such as CNN and FOX, and some media surprises.
All we can say is WOW! We have been getting used to strong double-digit growth from NTRI, so this is a major negative surprise. We did not see this coming, nor did analysts, but have to ask the following common sense questions:
- Did someone screw up big time with the ad messages, buying air time, and media mix?
- Did Weight Watchers’ momentum with Oprah and DJ Khaled steal customers?
- Are consumers starting to rebel against the comparatively high $250-300/month price of the NTRI program vs. WTW, MLM diet products, online programs and other do-it-yourself weight loss methods?
- Is the primary message to prospects of losing weight shifting to a broader “healthy lifestyle”, wellness, and a more holistic approach (now touted by WTW)?
- Are NTRI’s TV ad spokespersons getting stale (Marie Osmond)?
- Is the South beach Diet line cannabalizing the regular business?
- Did medical weight loss programs make recent inroads?
Certainly, it could be a combination of all these factors. We at Marketdata will be analyzing these issues and will look closely at recent meal replacements sales and consumer attitudes, to see if there was a major change in January and February.
The complete press release and financial tables can be found here: