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National

Oprah Winfrey to buy 10% of Weight Watchers in partnership

By Lindsey Rupp - Bloomberg News.

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October 19, 2015 08:58 AM

Oprah Winfrey will buy 10 percent of Weight Watchers International and join its board, giving the struggling provider of weight-loss programs a jolt of star power as it works to fend off cheaper digital rivals.

The shares surged as much as 87 percent to $12.69 after the company announced the investment, which will come in the form of newly issued stock and include an option to buy an additional 5 percent. As part of the deal, Winfrey also has signed up with a Weight Watchers program and will share her experiences along the way.

Weight Watchers could use a boost. The company has suffered from falling sales and profit as consumers migrate to free, digital methods for counting calories and keeping in shape. With the Winfrey partnership, Weight Watchers is broadening its mission to helping people live a “healthier, happier life” instead of just helping them lose weight, Chief Executive Officer Jim Chambers said in the statement.

“I believe in the program so much I decided to invest in the company and partner in its evolution,” said Winfrey, who'll also serve as an adviser to the company, helping with program development and execution.

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Weight Watchers, about 51 percent of which is owned by Luxembourg-based Artal Group SA, had fallen 73 percent this year through last week.

The investment gives Weight Watchers credibility with potential customers, especially among Winfrey’s large following, said RJ Hottovy, a Chicago-based analyst at Morningstar Inc. Winfrey, who is CEO of the Oprah Winfrey Network LLC and chairman of the Harpo Entertainment Group, could also open the door for advertising partnerships to consumers already in Weight Watchers’ demographic.

“It brings an unprecedented level of commitment for a Weight Watchers celebrity endorsement,” said Hottovy, who has a hold rating on the shares. “It potentially expands their audience and opens up some intriguing marketing opportunities as well.”

Weight Watchers has been working to update its image with new advertising and a redesigned magazine, which debuted in January. But the effort has yet to pay off. Sales fell more than 20 percent in each of the first two quarters of the company’s current fiscal year as it loses members to free options like MyFitnessPal.

Founded in the early 1960s, Weight Watchers built a system of dieting programs, food products and support centers for people seeking to slim down. But the New York-based company steadily lost cachet as consumer tastes changed. In February, Chambers said that Weight Watchers’ turnaround was taking longer than expected. It announced $100 million in cost cuts and gave a bleak forecast that sent the shares on their biggest drop since their initial public offering in 2001.

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