March 2, 2022
Weight Watchers reported its 2021 revenues, and it’s official — Medifast is now the largest worldwide weight loss provider, by sales, with $1.5 billion, topping WW revenues of $1.2 billion for the first time. This is significant, and highlights the slippage in WW dominance of this market for decades. WW has been through four CEOs during the past decade and it has faced an increasing number of competitors that have eroded its market share. These competitors have connected better with prospective customers, while WW has made minor tweaks to its model.
2021 Qtr. 4 and Full Year Results
On March 1, 2022, management said that: “…challenging category demand in Q4 pressured signups overall. This trend has continued so far in 2022, therefore, we are planning cautiously and controlling costs tightly in an uncertain demand environment.”
- FY 2021 End of Period Subscribers of 4.2 million
- Q4 2021 Revenues of $276 million
Revenues in fiscal 2021 were $1,212.5 million. On a constant currency basis, fiscal 2021 revenues decreased 13.7% versus the prior year.
- Subscription Revenues in fiscal 2021 were $1,063.0 million. On a constant currency basis, these revenues decreased 12.1% versus the prior year, primarily driven by declines in Workshops + Digital Fees as a result of the impact of the COVID-19 environment.
- Product Sales and Other in fiscal 2021 were $149.4 million. On a constant currency basis, these revenues decreased 23.7% versus the prior year, primarily driven by declines in product sales as a result of the closure of studios and reduced operations related to COVID-19 as well as cycling against the revenue received in connection with the WW Presents: Oprah’s 2020 Vision tour in fiscal 2020.
Gross Profit in fiscal 2021 was $726.4 million and adjusted gross profit in fiscal 2021 was $741.8 million.
Operating Income in fiscal 2021 was $196.3 million and adjusted operating income in fiscal 2021 was $216.2 million, which excluded the net impact of $19.9 million of restructuring charges. Operating income in fiscal 2020 was $216.2 million.
Net Income in fiscal 2021 was $66.9 million compared to $75.1 million in the prior year.
The company is providing Q1 2022 guidance, as follows: Revenues are expected to be approximately $300 million. The company is not providing full year 2022 guidance.
The complete Press Release and financial tables can be found here:
New CEO to take the Helm – Wait, What?
WW International, Inc. has named Sima Sistani, the co-founder and former CEO of Houseparty and a senior leader at Epic Games, as CEO. Sistani will join the company March 21, replacing Mindy Grossman, who previously announced her decision to step down. She also will join the WW board of directors.
Sistani co-founded Houseparty, a face-to-face synchronous social network, in 2016. Under her leadership, it grew to a community of more than 150 million users before it was acquired by Epic Games in 2019.
At Epic, she leads social gameplay and feature development for gaming products including Fortnite. She previously led mobile growth operations at Yahoo!, and after Yahoo! acquired Tumblr in 2013, became their first head of media.
We at Marketdata will never understand the choices that many companies make in choosing their CEO. This latest WW action is no exception. All due respect to Ms. Sistani, but she has NO experience in the weight loss market. So, why would WW choose her to lead the world’s second largest weight loss provider? Unless WW is putting nearly all their eggs in the Millennial dieter cohort basket, a demographic that is tech savvy and intimately integrated with social media. The weight loss market is complicated, tricky, and evolving. It requires more than a background in social media, gaming, and digital. We think that WW could have found a much better fit.
Conference Call Information
WW management said that their 4.2 million subscribers (down 6%) were comprised of 727,000 workshop subs and 3.4 million digital subs. They also reported that 70% of sign-ups in January chose a 6-month or longer plan. However, demand for in-person studios did not pick up in January. WW e-commerce business generated $85 million in 2021. The company now operates 430 WW studios and 650 third-party meeting sites. Digital revenues in 2021 made up 65% of the total. Studios have a 40% profit margin, while digital business carries a 78% margin.
Further, Q1 2022 revenues are expected to be down, to $300 million, and management is focused on cost control. The company has $154 million cash on hand.
Management claims that weight loss search activity and traffic were down industry-wide in January versus prior years, as an excuse for their headwinds. When talking about 2021 performance, WW management has claimed that consumers were “taking a break” from dieting, and there was an industry-wide slowdown. However, stock analyst Linda Bolton Weiser pointed out that Medifast posted record sales, surpassing WW. She also follows Medifast and said that their management’s research contradicted WW market research. Kudos to Ms. Weiser! For the first time in the past 10 years, she’s the first analyst we’ve heard to have the guts to challenge WW top management and even mention the competition! WW weakly countered that Medifast has a different model than WW, and that’s why they have a different market view.
Bottom line: If there was an industry slowdown and consumers weren’t dieting, then….did Medifast sales fall by 12% in 2021? No (up 63%). Did Herbalife’s North American weight loss sales dip 12%? No (-2.6%). Did Atkins Nutritionals sales fall 12%? No (up 1.2%). Did Slim-Fast (Glanbia) sales fall 12%? No (up 6.4%). Did NutriSystem sales dip 12% (not likely, but data not available). The evidence is clear. WW excuses just don’t hold water.