Weight Watchers (WTW)

Weight Watchers (WTW) is a very promising pick.

There are two things that might go wrong with the company.

One is its huge debt load. The long term debt for the company was $2.4 bn as of Jun 29, 2013. The interest expense for the debt was $50 mn in the last 6 months. The company has very nice cash flows and the interest is well covered. Furthermore, the debt is due a long time in the future. Here is the summary of the long term debt.

Long Term Debt (WTW)

 

The second problem is the challenges the company faces in the market. I am convinced that any weight loss diet should have a social component, otherwise people go back to their old ways. This is probably one of the significant reasons why Weight Watchers has some success in this area. Mobile application will have a difficult time offering the social  component and face to face interactions. The problem is that WTW may perform poorly for a few years.

The high debt load complicates the situation in this sense. If the business continues to suffer than WTW might have problems with the lender banks.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s