NutriSystem Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: NutriSystem (Nasdaq: NTRI  ) dropped 31% in intraday trading today after issuing massively disappointing guidance for the current quarter and 2011.

So what: Fourth-quarter revenue declined 17% year over year as potential customers apparently chose thicker wallets over thinner waistlines. New Year's resolutions didn't help, with management describing its annual January promotion as "ineffective" because of "intense competitive activity and bargain-focused consumer behavior."

Now what: A major new product launched by a competitor in January is pressuring prices and profits. In response, management stated it is taking cost-cutting actions and, "We need new product offerings and new sales channels to re-energize top-line growth." EPS guidance of $0.40 to $0.50 for 2011 and a loss of $0.30 to $0.35 in the current quarter fell far short of consensus estimates of $1.30 and $0.31, respectively. At a forward P/E ratio of about 31 times, investors should stay on the sidelines pending evidence of a turnaround.

Interested in more info on NTRI? Add it to your watchlist by clicking here.

Fool contributor Cindy Johnson does not own shares of any company named above. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (2)

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  • Report this Comment On February 25, 2011, at 5:10 PM, leohaas wrote:

    It does not surprise me that they are tanking. My wife recently tried their food. It is awful. That is how they get you to lose weight. Stay away from this company. The product they sell is not worth the money. Make that any money.

    PS. Their customer service is excellent. We returned the product for a full refund.

  • Report this Comment On February 25, 2011, at 11:37 PM, DAHTcom wrote:

    "A major new product launched by a competitor in January is pressuring prices and profits."

    What is that new product and competitor?

  • Report this Comment On February 28, 2011, at 3:08 PM, shoot54today wrote:

    The new product is MonaVie RVL. Based on nutrient density. www.monaviervl.com

    May email me @ shoot54today@live.com

  • Report this Comment On March 22, 2011, at 9:28 PM, jcmonav wrote:

    I am not surprised that the nutrisystem lost sales the new RVL products are the highest nutrient per calorie system and its easy and great tasting. It doubles as breakfast on the go for those just wanting nutrition, and we personally LOVE it!

    you will want to try it, if you have taste buds and are tired of no calorie diets and not enough nutrition. stimulants and fillers only keep you from falling apart so long. may e-mail me at jclivingart@yahoo.com I do know how to get you some wholesale

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