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Weight Watchers: A poorly timed rebranding has crushed investor expectations and collapsed the share price
On February 26th 2019, dieting and weight-loss company Weight Watchers released its annual report for 2018. The share price settled in the week following the announcement, but not before the company suffered the second-largest share price drop in its history, dropping nearly 35% overnight.
While the financial performance was remarkable – revenues and operating incomes grew more than $200m and $100m respectively – investors were primarily interested in what is perhaps Weight Watchers’ most important metric: its number of end of period subscribers. Historically Weight Watchers has found subscribers following a cyclical pattern, with large spikes in the first quarter following Christmas and New Year resolutions before slowly dropping throughout the course of the year.
In 2018, however, the company lost nearly 700,000 subscribers – nearly twice what it lost the previous year and a record-low. This has left investors shaken in spite of the strong overall financial performance. The losses are due almost exclusively to its at best questionable decision to abandon its 60 year-strong name and rebrand to the vague ‘WW’.
The decision to pivot away from its recognizable name has been a terrible decision, partly due to the timing of the move. The first quarter of the year is the most crucial for the company, so to announce the rebranding in September – mere weeks before the start of the marketing push for post-Christmas dieters – was a short-sighted gamble that so far has not paid off.
While the company has to follow market trends, more and more young people are shunning traditional weight-loss techniques in favor of living a more generally healthy lifestyle. The new name is vague and uninspiring; potential new members will struggle to pair WW up with the old Weight Watchers brand. Instead, these potential customers are simply looking elsewhere, and in an increasingly competitive and demand-driven market such as this, such a shift could likely be a disaster for the 60-year old company.