February 15, 2013, 4:21 PM

Weight Watchers has a ‘disappointing’ start to the year

The merchant grew online sales 21.6% in 2012.

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Nutritional products merchant Weight Watchers International Inc. boosted online and total sales in 2012, but is experiencing a rough start to a new customer recruitment program thus far this year, according to an earnings report issued this week.

For the fiscal year ending Dec. 29, 2012, Weight Watchers, No. 61 in the Internet Retailer Top 500 Guide, reported:

  • Internet revenue of approximately $486.4 million, a 21.6% increase compared with about $400.0 million in 2011.
  • Total sales of $1.827 billion, a 0.4% increase from $1.819 billion in 2011.
  • Net income of $257.4 million, a 15.6% decrease from $304.9 million in 2011.

In December, the merchant launched a weight loss program dubbed Weight Watchers 360, designed to improve customers’ weight-loss results and differentiate its membership program from competitors’. The results have been “disappointing” thus far, says CEO David Kirchhoff.

“Needless to say, we’re not happy with the trends we’re seeing,” Kirchhoff said in a call with investors this week. “While we did see some improvement in recruitment trends when we soft-launched the program in December, this early momentum has not sustained itself. In fact, in January and into the first part of February, we have seen double-digit declines in recruitment [in our] U.S. Weight Watchers online businesses.”

Weight Watchers says its online business is suffering from an increase in free online weight-loss programs from competitors. “The WeightWatchers.com awareness-driving strategy that has been so successful… started losing some effectiveness roughly six months ago,” Kirchhoff added. “We now need to shift gears to leverage the groundswell of people interested in weight loss mobility tools by communicating the full value proposition of Weight Watchers Online.”

The retailer also announced that Mike Basone, its chief technology officer and president of WeightWatchers.com, is resigning effective May 31 to pursue other opportunities. No successor has been named.

For the fourth quarter, Weight Watchers also reported:

  • Internet revenue of $117.6 million, a 17.6% increase compared with $100.0 million in Q4 2011.
  • Total sales of about $407.9 million, up 1.7% from approximately $401.3 million in the year-earlier period.
  • Net income of $58.0 million, an 8.9% decrease compared with $63.7 million in Q4 2011.
  • The number of active online subscribers was 1.87 million, up 17.6% year over year.
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