Oprah Winfrey takes stake in Weight Watchers as company refocuses on wellness

Oprah Winfrey’s endorsement was once enough to boost books to bestseller lists and send sales soaring of products dubbed her “favorite things.”

Now Weight Watchers International Inc. is counting on that influence to propel its waning weight-loss brand past the competition of free diet and fitness mobile apps.

The New York City-based company said Monday that Winfrey has bought 10% of its shares and will join the firm’s board of directors to bring her insight to future products and programs.

As part of a five-year agreement, Winfrey gave Weight Watchers permission to use her name, image and endorsement on its products and programs. The company said Winfrey had joined the program and “will candidly share her experiences and perspective along the way.”

The company’s website already features Winfrey’s photo and a greeting, “I’m ready. Are you? Come join me!”

“Weight Watchers has given me the tools to begin to make the lasting shift that I and so many of us who are struggling with weight have longed for,” said Winfrey, who has publicly battled weight fluctuations for decades. “I believe in the program so much I decided to invest in the company and partner in its evolution.”

Weight Watchers’ stock price has already benefited from the “Oprah effect.”

Shares soared $7.13, a whopping 105%, to close at $13.92 on Monday, more than doubling the company’s market value to $796.4 million. Monday was Weight Watchers’ biggest trading day, with more than 71 million shares changing hands.

Winfrey is not the first celebrity to endorse Weight Watchers — past spokespeople include Jessica Simpson and Charles Barkley — but she could be the most committed and credible, said R.J. Hottovy, consumer equity strategist for Morningstar.

The power of Winfrey’s approval is well demonstrated. People highlighted on her popular television talkathon, “The Oprah Winfrey Show,” shot to stardom, and even helmed their own shows, including psychologist Phil McGraw and cook Rachael Ray. Products featured on her “Oprah’s Favorite Things” segment quickly sold out.

“She’s been successful with just about everything,” said Ira Kalb, assistant professor of clinical marketing at the USC Marshall School of Business. “She’s already got an audience ... so if she endorses a product, that audience is going to follow.”

The partnership with Winfrey comes as Weight Watchers has struggled to attract customers, who increasingly gravitate toward free or cheaper mobile apps or fitness trackers. The company known for its in-person and online group meetings for weight management hit its peak in the mid-2000s, but was outstripped by more convenient mobile platforms by 2012, Hottovy said.

A year later, the business really started to slow. The company now has about $2 billion in debt. Its stock price peaked at $85.76 in May 2011.

One of Weight Watchers’ biggest competitors is MyFitnessPal, an app that tracks food and exercise. The company has also struggled as people move toward overall wellness rather than just calorie counting, which in the Weight Watchers’ program is tracked using a points system that also accounts for the mixture of protein, carbohydrates, fat and fiber in food.

In the last year, Weight Watchers has pivoted to address a more holistic approach to health and wellness. In an August call with analysts, the company acknowledged that customers wanted to lose weight through a combination of more healthful eating, fitness and emotional strength, and it would develop a new marketing campaign to reflect this.

“We are expanding our purpose from focusing on weight loss alone to more broadly helping people lead a healthier, happier life,” company Chief Executive Jim Chambers said in the statement announcing Winfrey's involvement.

The company is also set to announce a change to the program, which it called “the biggest innovation” in Weight Watchers history. Details are sparse, but analysts expect it will have a fitness angle. Each time the company announces changes to the program, sales typically increase, said Alex Fuhrman, senior research analyst for Craig-Hallum.

“This is really the stars aligning,” he said. “Your busiest time of the year, the most important program change ... and with someone who is quite possibly the single best brand ambassador out there.”

Winfrey is paying about $43.2 million for 6.4 million shares of Weight Watchers at a price of $6.79 each. Winfrey also has the option to acquire an additional 5% of shares.

Winfrey's appointment increases the Weight Watchers board of directors from nine to 10. Her term expires in 2018.

“We believe that her remarkable ability to connect and inspire people to realize their full potential is uniquely complementary to our powerful community,” Chambers said in a statement.

Winfrey’s partnership could lead to new marketing synergies with her access to print, digital and television media, but it doesn’t erase the competitive pressures Weight Watchers already faces or its struggle to resonate with a younger demographic that’s more engaged with technology, Hottovy said.

But analysts said she certainly could help.

“I think the ball’s in their court,” Fuhrman said. “Whatever the change to their program is, Oprah gives them an outlet to get the message out.”

samantha.masunaga@latimes.com
Twitter: @smasunaga

Copyright © 2017, Los Angeles Times

UPDATE

4:58 p.m.: Updated with additional details and background.

Originally posted at 7:57 a.m.

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