Weight Watchers' sales forecast falls short, and subscribers are down. Now it's buying its way into telehealth

The company that oversees the Weight Watchers program forecasted first-quarter sales that were below expectations.

Weight Watchers' sales forecast falls short, and subscribers are down. Now it's buying its way into telehealth

WW International Inc., the company that oversees the weight-loss program Weight Watchers, on Monday forecast weaker first-quarter sales and said sign-ups were down so far this year.

WW WW, -8.94% published the forecasts soon after the Wall Street Journal reported on the purchase of Sequence Telehealth Platform by Weight-loss Plan Provider Sequence for $106 Million. The Journal stated that WW would have access to drugs such as Ozempic or Wegovy, which combat obesity and diabetes. Later, the company confirmed the agreement on its earnings call.

After hours Monday, shares rose 8%

After a net profit of $29.9million, or 42cs per share in its fourth quarter last year, the company reported a loss of $32.5 millions in the fourth quarter. Revenue decreased 18.8% to $223.9million, compared to $275.8million in the same quarter of 2021.

Analysts polled by FactSet expected WW to report sales of $225 million, with a GAAP net loss of 11 cents a share.

For the fourth quarter, end-of-period subscribers fell 14.9%, amid a pullback in the company's digital business.

WW forecast first-quarter sales of around $235 million, compared with FactSet estimates for $244 million.

Heather Stark, interim chief financial officer of the company, stated that while member sign-ups have fallen year over year in 2023, this is due to the fact that we intentionally moved a portion our annual marketing budget from winter to the fall. This allows us to concentrate our spend alongside our digital product launches during the second half of the calendar year and eventually return the company back to growth.

Chief Executive Sima Sistani, who took on that position last year, said she expected trends to improve throughout the year.

"We look forward to upcoming launch focused on creating community and supporting members, as well as enabling key behavior, as well as our entry in clinical weight management," she said.

The acquisition of Sequence is expected to close in the second quarter. It would follow several years of stumbles for WW, including a broader shift to wellness and personalized diet plans that failed to catch on, the Journal said.

WW plans to market Sequence's telehealth services on the Weight Watchers app, and create exercise and wellness plans for people who take weight-loss drugs, according to the Journal. Sequence had around 24,000 members as of last month, and doctors on the platform can prescribe medications like Ozempic, Wegovy and Mounjaro, the Journal reported.

D.A. Davidson analyst Linda Bolton Weiser, in a note in December, said that Sistani had helped with the company's turnaround — strengthening the company's technology and improving the app to strengthen connections between users and 'incentivize users to track their points and weight-loss progress, as these are critical factors in facilitating behavioral change.'

Weiser stated that she believes she "gets it" and correctly identified WW's competitive edge, which is the community of WW meetings and their accountability.

The shares of WW have fallen 58.2% in the last 12 months. Comparatively, the S&P 500 Index SPX (+0.07%) has fallen 3.6% in that time.