Why Weight Watchers Shares Plunged

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: Shares of weight-management services specialist Weight Watchers International (NYSE: WTW  ) plummeted 16% on Thursday after its quarterly results and guidance came in below Wall Street expectations.

So what: Weight Watchers' first-quarter EPS managed to squeak past estimates, but a miss on the top line -- $484.8 million versus the consensus of $492.5 million -- coupled with a downbeat outlook is forcing analysts to lower their growth estimates yet again. Last week, close rival Nutrisystem (Nasdaq: NTRI  ) also posted a weak quarter and issued disappointing guidance, suggesting that weight-management companies are being hit particularly hard by a pullback in discretionary spending.

Now what: Management now sees full-year EPS of $4.00-$4.20, well below the Wall Street consensus of $4.58. "Since June we have seen a weakening in our trends so we are taking a more cautious view of our business for the second half of the year in light of difficult macro-economic trends, particularly in consumer sentiment," CEO David Kirchhoff said in a statement. Of course, with the stock hitting a new 52-week low today and trading at a single-digit forward P/E, much of that uncertainty might already be baked into the price.

Interested in more info on Weight Watchers? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

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