Last week publicly-traded Nutri-System reported quarterly results to investors and, unlike the waistlines of its sports celebrity pitchmen, company profits have slimmed considerably. In the past quarter (three months), the value of the company’s stock has declined by 52%, equaling a $500 million dollar loss.
(For $500M, could they have lost the Men’s Wearhouse?)
Last Tuesday afternoon, the stock fell 16% in just a few minutes following an earnings report that included a prediction from company executives that declining sales were not expected to improve anytime soon. Previously, the company had predicted significant profits for the first quarter of ‘10, only to fall considerably short.
So as the economy slowly improves, why do Nutri-System losses continue to pile up? From what the company indicated last week, marketing expenditures are the culprit.
(Patronizing your own Hooters casino steakhouse will do that)
In other words, Nutri-System as a company has lost half its value in the past three months in part because of an overextended ad campaign featuring Don Shula, Dan Marino, Chris Berman and (previously) Mike Golic, among others.
Okay, understandable that people would be put off by fat guys on TV trying to sell you a diet plan. But it appears that the unpopularity of that ad campaign infected the company’s retail sales.
In its Tuesday report, Nutri-System executives told investors that retail sales partnerships with Walmart and Walgreens yielded “immaterial results.” Those results were so bad that Nutri-System may soon abandon retail altogether.
All this doesn’t mean that Nutri-System will soon be bankrupt. It still has a solid core business that doesn’t involve using Chris Berman to tell us how to lose weight. But from what the company said Tuesday, it’s clear that spending hundreds of millions on television ads and other marketing involving overfed ex-jocks and sportscasters is not in the company’s future plans.