On its conference call yesterday, online diet-plan provider eDiets.com's
Though the company focused on rebuilding in the fourth quarter, the results aren't yet apparent. Revenues plunged 19% to $9.5 million, and eDiets posted a net loss of $209,000, or $0.01 per share.
eDiets makes more than three-quarters of its revenues by selling monthly subscriptions for diet plans. Its offerings involve strong brands like SlimFast and Atkins, but that hasn't been enough to attract customers. Over the past year, the ranks of paid members plummeted from about 200,000 to 118,000. Members don't seem to be motivated enough to stay, continuing to drop like flies; the company's overall membership has dropped even further, to 110,000.
A key component in Rattner's turnaround plan is continued improvement in customer acquisition costs, and eDiets has already made progress here. Over the second half of the year, it focused on acquiring customers at profitable levels by decreasing inefficient ad spending. This trimmed the average customer acquisition cost from $64 last year to $56.
Why isn't eDiets focused on retaining customers? The typical dieter stays with a plan for less than a year, requiring eDiets to keeping launching programs and finding new members. It's a tough business model.
The launch of the eDiets Deliciously Yours meal delivery service might also alleviate some of the customer turnover. Pricing starts at $15.95 per day, and the plan sports gourmet offerings such as shrimp scampi and chocolate swirl cheesecake.
Even if this service helps customers stay with the program, eDiets still faces challenges. Its low-priced approach is likely to pressure margins, and with only $6 million in the bank, it lacks the firepower needed to market against biggies like NutriSystem
For the past few years, eDiets has talked about new strategies to turn things around. Its main problem may be that dieters have many alternatives, including Weight Watchers
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