Wed Aug 1, 2012 9:25pm EDT
(Reuters) – Weight Watchers International Inc slashed its full-year profit forecast after its second-quarter sales were hurt by a drop in the number of people attending its meetings.
Weight Watchers shares fell as much as 15 percent to $41.62 in after-market trade on Wednesday, after closing at $48.79 on the New York Stock Exchange.
The company said it has been experiencing weakness in business trends since June and is cautious about the second half of the year in light of difficult macroeconomic trends.
Weight management companies are among the first to be hit by an economic slowdown as people scale back discretionary spending.
“The second-half recovery that we previously forecast will not happen,” a company executive said on a call with analysts.
Weight Watchers said it would start 2013 on a weak note due to lower membership in its meetings business in North America and economic uncertainty in Europe.
The New York-based company now expects to earn between $4.00 per share and $4.20 per share for the year, down from its previous forecast of $4.60 per share to $4.80 per share.
Analysts were expecting it to earn $4.58 per share for the full year, according to Thomson Reuters I/B/E/S.
Weight Watchers, which spent about 17.3 percent of its revenue, or $84 million, on marketing during the second quarter, said it expects the full-year figure to be higher by 3 percentage points.
The company has been increasing spending on marketing, selling and administrative operations to gain an edge over rivals like Nestle’s Jenny Craig Inc, Nutrisystem Inc and Medifast Inc.
Weight Watchers reported earnings of $77.5 million, or $1.36 cents per share, for the quarter ended June, down from $87 million, or $1.17 cents per share, a year earlier.
The company, which offers weight management plans through a network of company-owned and franchise operations, said sales for the quarter fell by $1.2 million to $484.8 million.
Analysts on average had expected the company to earn $1.35 per share on revenue of $492.5 million.
Revenue at the company’s meetings business, which organizes meetings to offer nutritional advice to groups of customers, fell about 7 percent to $209 million in the quarter.
Rival Nutrisystem also posted a lower second-quarter profit last week, hurt by higher costs, and it forecast third-quarter earnings below Wall Street estimates.
However, peer Herbalife Ltd reported quarterly earnings above analysts’ expectations for the ninth time in a row, boosted by higher demand in emerging markets.
(Reporting by Arpita Mukherjee and Juhi Arora in Bangalore; Editing by Roshni Menon)
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