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  • RSCL commented on The Science of Hitting's article 08-18 09:13
    Weight Watchers: Three Takeaways From the Second Quarter
    Weight Watchers (WTW) recently reported second quarter results, and there were a few things that caught my eye. Just to be clear, this isn’t a...
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    RSCL 08-18 10:13
    • The negative equity resulted from the company's return of capital to shareholders using debt. Unfortunate timing in recent years but not because the business was destroying value. Business has deteriorated but does not destroy value yet. 

      Behavioral change for most people require some form of community support or pressure. The more serious the case, the greater the support or pressure needed. WTW's core target profile is the person who is moderate-to-serious about wanting to lose weight, likely after trying less 'communal' methods. But humans take the path of least resistance - right now that would be apps that you can use as and when you want, with no pressure. Those with less of a weight/discipline problem will find these apps and wearable tech effective. They are the ones who would likely have gotten down to it even without the new tech. Those with moderate-to-serious weight/discipline problems may find that these new tools make it more convenient but not necessarily effective in changing habits. In a similar way, someone with a spending problem is unlikely to become a saver just because expense tracking apps become widely available.

      The questions for me are


      Will a disruptor emerge and marry peer support and digital convenience and achieve scale before WTW does? 
      Will WTW remain solvent until trend changes?
      Will the controlling shareholder act in a way detrimental to the interests of minority shareholders?


      This is no fish-in-a-barrel situation but I feel current valuation is sufficiently attractive. I am long at current price and will look to add. 

      Thank you, SoH. I enjoy reading your articles.

       

       
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