Oprah’s word carries weight with slimmers
TV host’s investment and guidance revive Weight Watchers
● Oprah Winfrey is showing Wall Street’s most celebrated investors how it is done, with a bet on a previously struggling diet company generating hefty returns for the American entrepreneur and philanthropist.
In October 2015, Winfrey made a $43million investment in Weight Watchers International, then a beleaguered dieting company worth less than $7 a share, joined its board and lent her brand of positive self-help to its marketing. Last week, its stock hit a record $101 (about R1400), a 1400% rise since Winfrey bought in.
Activist investors have carved out careers — sometimes fortunes — taking a large stake in companies while promising that they alone have the secret sauce to improve performance.
Some have become famous, such as Bill Ackman, who was lauded after a stellar decade of returns before losing a series of big bets. His listed fund, Pershing Square, has lost money for the past three years.
In contrast, Winfrey’s 8% holding in the revived and rebranded “wellness” company is now worth $543-million, swelling her fortune to $4-billion and making her the first black woman entrepreneur on Bloomberg’s Billionaires List.
“It’s difficult in public markets, beyond tech or biotech, to make that kind of return,” said James de Bunsen, a portfolio manager at Janus Henderson.
In 2017, Weight Watchers outperformed Hedge Fund Research’s activist index, which gained 5.5%, by 281%. The Russell 2000 small- and mid-cap US index rose 13% last year.
Nick Hotchkin, Weight Watchers chief financial officer, dismissed the idea that Winfrey was any sort of activist investor. Instead, he described her as “a passionate, wonderfully talented woman who’s leading with her heart, and the authenticity of who she is, and her brand, to help us bring healthy living to people around the world”.
Weight Watchers insists that even before Winfrey joined the board it had begun cutting its reliance on revenue from people paying to attend its weight-loss support groups, often found in community centres and featuring weekly weigh-ins.
However, Hotchkin said that Winfrey had helped pick Mindy Grossman, who revived the ailing Home Shopping Network TV channel and started as the company’s CEO early last year. Hotchkin said “kindred spirits”
Celebrity investors are common . . .
But few have the distribution network or loyal following of Winfrey
Grossman and Winfrey “touch base often”. Weight Watchers also features Winfrey prominently in US marketing, and she has appeared at events for its 18 000 employees.
As well as harnessing Winfrey’s brand in its marketing, Alex Fuhrman, an analyst at Craig Hallum, pointed to the success of Weight Watchers’ fast-growing online segment as a “great example of Oprah’s influence”, citing her active presence on its social network and hosting of members-only conference calls and webcasts.
Key to Weight Watchers’ revival has been its remodelled food-tracking app and online social network, Connect, with weekly subscription fees starting at $3.07. The company has a record 4.6 million members.
Analysts at JP Morgan, which started covering Weight Watchers this month with an “overweight” rating, said margins for the company’s online offering were 40% higher than traditional meetings.
“The trends were starting to get a little bit better before Oprah joined the company, but she was a big catalyst to accelerate things,” said Fuhrman. She inked her 2015 deal with Weight Watchers after trying its new, lessrestrictive food plan for herself.
The company is now so closely linked to Winfrey’s image that Fuhrman said he considered an oft-speculated presidential bid by the media mogul to be “one of the biggest risk factors to the Weight Watchers story”.
Celebrity investors are common, from actor Ashton Kutcher backing tech start-ups to George Clooney co-founding a tequila brand. But few have the distribution network or loyal following of Winfrey, who has close to 43 million Twitter followers.
“She was advertising and talking about Weight Watchers on her own show,” said a London portfolio manager, who expressed regret at not having bought the share.
Previously, Winfrey’s endorsement has helped propel entrepreneurial companies such as Spanx underwear to multimilliondollar revenues. A 2008 academic study estimated that her support for Barack Obama was worth a million votes.
Winfrey’s daytime talk show concluded in 2009, but she continues to present interview programmes on her OWN network, and appears monthly on the cover of O, The Oprah Magazine.