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.
1:26 pm on March 9th, 2010
As Dan Patrick stated a years ago, one of the reasons he left ESPN was Nutri-system, they bought a ton of ad space and paid marino, Berman and others to endorse it, BUT!!! they told them to first gain 20-30 pounds before they took the before photos, their food was paid for to help them do this and they were given upwards of 500k each to lose the weight that was pre gained for advertising purposes, a total scam
1:45 pm on March 9th, 2010
c’mon brooks. we can do better than they lost $8 billion dollars. this is a drudge like statement. i guess it’s all about the pageviews!
maybe you should break down the math for your non finance readers.
2:06 pm on March 9th, 2010
brooks, you patrick hair club for men…don’t worry!
2:44 pm on March 9th, 2010
As a quantitative analyst. It is wrong to make it sound like they hired Chris Berman and lost 8 billion dollars in marketing, fixed, and variable costs in one quarter. It may serve readers to say that the company’s market cap value lost 8 billion dollars but than again I am sure that in the financial meltdown in late 2008 to march 2009 they lost a lot more. Either way thanks for a great article and sorry if I sounded rude above.
4:34 pm on March 9th, 2010
If you read the earnings report, it’s clear that marketing costs, in the minds of company officers, was a major factor in the company not coming close to guidance for Q1. (See scapegoat.)
That was only a part of the market cap meltdown, along with the company portraying unrealistic expectations starting in Q4.
While the ads aren’t to blame entirely, clearly the company thought the ads would explode sales. The opposite happened. Perfect storm.
But the statement that the sports guys in the ads contributed to a $500M paper loss for the company is 100% accurate. There’s other circumstances, including abject mismanagement, but the ads played a significant role.
The company now has a realistic valuation. The stock never should’ve been that high in the first place in my opinion.
7:50 pm on March 9th, 2010
Berman sucks, Marino couldn’t win a super bow, Shula is a bitter old guy, and Golic, well he’s a domer so he plain sucks.
1:03 pm on March 10th, 2010
Is it just me, or does Marino look like the a-hole Play-Tone record executive in “That Thing You Do”????
2:19 am on March 11th, 2010
Whoever does marketing for them is just plain stupid. Guys are not going to buy this and watching those has beens is certainly not going to change anyones mind. Give me a break that Dan Patrick was too good to take that money. That loser would take 500k to have someone urinate on him.