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Stock Analyst Update

Weight Watchers CEO Resignation a Strategic Move?

CEO Jim Chambers' surprising decision may indicate that the board wants to find the appropriate person to oversee Weight Watchers' growth plans over the next several years.

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In a surprise move,  Weight Watchers (WTW) CEO Jim Chambers plans to step down on Sept. 30. While the board commences an external search for a new CEO, the company will be led by an interim "Office of the Chief Executive Officer" composed of CFO Nick Hotchkin, director Chris Sobecki (a managing director at Weight Watcher's largest shareholder, Invus Group), and newly-appointed director Thilo Semmelbauer (who most recently served as president and COO of Shutterstock from 2010-2015 but was part of the founding team for weightwatchers.com and also held the title of COO of Weight Watchers International from 2007-2008).

The timing of Chambers' move is unusual, as it comes after Weight Watchers had been gaining traction with its "Beyond the Scale" platform, upgraded technology platform, and Oprah Winfrey-led engagement efforts, and also ahead of the important 2017 winter recruiting season. However, after speaking with management, we do not believe Chambers' decision has anything to do with performance--in today's release, Hotchkin reaffirmed he expects the current quarter will be the fourth consecutive quarter of year-over-year member growth--or changes in the company's long-term strategies. Instead, we believe the move had more to do with the board wanting to find the appropriate person to oversee Weight Watchers' growth plans over the next several years.

There is no change to our $13 fair value, no-moat rating, or Standard stewardship rating based on the announcement. While CEO departures and interim management appointments always carry some degree of executional risk, we believe the interim CEO group brings a nice balance between financials (Hotchkin), operations (Semmelbauer), and shareholder alignment (Sobecki) to keep the company's near-term objectives on track. As for what we expect from a new CEO, we expect an external candidate with meaningful experience in the health/wellness industry with a willingness to explore new uses of technologies and marketing solutions.

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R.J. Hottovy does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.