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Why Weight Watchers International, Inc. Got Walloped

By Brian D. Pacampara, CFA – Feb 14, 2014 at 12:40PM

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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 specialist Weight Watchers International (WW 0.76%) plummeted 26% today after its quarterly results and outlook disappointed Wall Street.

So what: The stock has plunged over the past several months on poor sales trends, and today's abysmal Q4 results -- earnings sank 47% on a revenue decrease of 11% -- coupled with downbeat guidance suggest that things are only getting worse. In fact, membership paid weeks, or global engagement, sank 8.5% over the year-ago period, reinforcing concerns over rapidly increasing digital calorie-counting competition.

Now what: Management now sees full-year EPS of $1.30-$1.60, well below the average analyst estimate of $2.78. "In Q4, we performed in line with our expectations," President and CEO Jim Chambers said in a statement. "While we are confident that we are on the right track to execute a successful transformation, 2014 will be a very challenging year." Of course, with the stock now off more than 50% from its 52-week highs and trading at a price-to-sales well below 1, those challenges might already be baked into the valuation.

Brian Pacampara has no position in any stocks mentioned. The Motley Fool owns shares of Weight Watchers International. 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.

Stocks Mentioned

WW International, Inc. Stock Quote
WW International, Inc.
$3.97 (0.76%) $0.03

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