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UPDATE 1-Weight Watchers says lower marketing to hurt 2015 profit
July 30, 2014 / 10:37 PM / 3 years ago

UPDATE 1-Weight Watchers says lower marketing to hurt 2015 profit

(Adds details from conference call, updates shares)

July 30 (Reuters) - Weight Watchers International Inc said it expected 2015 profit to take a hit as it cuts down on marketing expenses to focus on technology upgrades to better compete with diet apps and calorie-counting gadgets.

The company’s shares fell 3 percent in extended trading, reversing a 15 percent gain triggered by better-than-expected second-quarter results and an increase in 2014 profit forecast.

The company, which offers plans that help lose weight and makes diet foods, said it expects 2015 profit to be hurt by about 60 cents per share due to “the solidly negative recruitments this year.”

The company also said it expects gross margins to fall in the second half of 2014 as it invests more to prepare for the winter season and replaces legacy technology assets.

Gross margin in the second quarter fell to 56.8 percent from 60.3 percent a year earlier.

Weight Watchers raised its full-year profit outlook to $1.65-$1.85 per share from $1.45-$1.70 per share.

The company, which spent $295.6 million on marketing in 2013, expects to cut marketing expenses by about $30 million this year.

Net income fell to $54 million, or 95 cents per share, in the quarter ended June 28, from $64.9 million, or $1.15 per share, a year earlier.

Excluding items, the company earned 98 cents per share.

Net revenue fell 15.5 percent to $397.5 million.

Analysts on average had expected earnings of 77 cents per share on revenue of $387.7 million, according to Thomson Reuters I/B/E/S.

Weight Watchers’ shares were trading at $21.01 in extended trading. (Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Don Sebastian)

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