Column: First Oprah, now a scientific study: Weight Watchers offers wary investors another story
Weight Watchers International, whose shares have been on more of a roller coaster than a dieter on an binge-and-starve cycle, uncorked another overhyped story for stock investors last week. Its stock price dutifully climbed 18% in a day, closing Friday at $14.92, its highest point since Jan. 11.
As with previous surges in Weight Watchers spurred by its connection with Oprah Winfrey, this one appears to be fading fast. As we write at midday Monday, Weight Watchers is down more than 6% on the day, to $14.02.
If you just look at the funding, you can make a very good guess as to what the study will show without reading anything else.
— Obesity expert David Ludwig, quoted by the New York Post
The driver of this surge was the company’s announcement that a study by Indiana University medical school researchers found that adults with prediabetes — a known consequence of obesity — lost “significantly” more weight and had more improvement in prediabetes markers using Weight Watchers than a control group whose members tried to lose weight more or less on their own.
The company’s news release about the study quoted its chief author, David G. Marrero, as stating: “The flexibility of the Weight Watchers model — with curriculum available online and at various locations, days and times throughout the week — is compelling to those who need flexibility to accommodate today’s busy lifestyle.”
What wasn’t so obvious, however, was who funded the study. It was Weight Watchers.
That fact was disclosed in the study itself and the news release, though down at the bottom. It appeared to be overlooked by some of the investment commentators trumpeting the study, including the Motley Fool and Business Insider, neither of which mentioned the company’s role.
It was noticed, however, by the New York Post, which quoted obesity researcher David Ludwig of Harvard observing that studies funded by commercial companies tend to have results those companies find gratifying.
“We found that if a food company sponsored a research study, the outcomes were four to eight times more likely to be more favorable to that company’s interests than if the study was independently funded,” Ludwig told the Post. “If you just look at the funding, you can make a very good guess as to what the study will show without reading anything else.”
Marrero makes the case, however, that Weight Watchers’ funding didn’t bias his results. “They had no role in analyzing the data, and no right to rewrite the paper or alter a single word,” he told me. “We said, ‘If you’re supporting the research, you have to accept the results.’”
Marrero is an established figure in the field. He’s a professor at the medical school and director of its Diabetes Translational Research Center. He participated in the landmark, federally funded Diabetes Prevention Program, which established in 2002 that weight loss and lifestyle changes rather than medication could avert Type 2 diabetes in high-risk individuals, such as the obese. He also helped the YMCA develop a nationwide program modeled on the DPP.
He says that he and Weight Watchers found each other roughly simultaneously: The company was trying to get its system of counseling and motivational goals certified as a diabetes prevention regime by the government, which meant it had to develop data; he was interested in whether a program like Weight Watchers could match the YMCA’s more structured system.
“It wasn’t clear at the outset that Weight Watchers would be successful,” he says. The company paid about $250,000 toward the salary of Marrero and his associates during the study, which was launched in 2013 with 225 subjects, and also paid the participants’ program fees.
Marrero says the advantage of Weight Watchers for many participants may be its flexibility. The YMCA program requires enrollees to attend scheduled counseling sessions; with Weight Watchers, members can go to a session on their own schedule. If they stick to the protocol, he says, they have a good chance at meeting the benchmark of 5% to 7% weight loss that reduces their risk of diabetes.
Weight Watchers executives have good reason to play up stories such as the Indiana University study as much as they can: The company’s business generally is on the downslope. As we observed earlier this month, its business model, based on collecting monthly subscription fees and hawking diet foods to members, faces increasing competition from online weight-loss nostrums and diet apps. Membership has been declining since 2012.
Doubts are common that dieters following even the best commercially marketed regimes can keep the pounds off for more than, say, six or twelve months.
So it’s not surprising that the bounces Weight Watchers shares have experienced in recent months have been associated with its publicity releases, not its business trends. The first was an announcement in October that Oprah Winfrey had bought a 10% stake in the company. Weight Watchers nearly doubled on the day of the announcement and kept rising for about a month. It peaked at $26.61 and since has fallen by more than half.
Then, last month, Weight Watchers launched an ad campaign featuring Oprah. The campaign kicked off Jan. 26 with a tweet from Oprah promoting the diet program. The stock gained nearly 20% from its close the day before, ending at $13.29.
By Feb. 12, however, it had given up all that gain and a little bit more, closing at $11.05. Cue the PR department, which on Friday touted the Indiana study.
All this action leaves the question of what’s left in the Weight Watchers arsenal. A clue to whether the company really has a solution to the changing landscape in diet programs or to its declining position will come on Thursday, when it announces its latest earnings and projections for the future.
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