Analyst Note| Jaime M. Katz, CFA |
No-moat WW continues to shift away from its traditional workshops, focusing on digital initiatives such as D360, which is aimed at millennials (50% of D360 users). However, slower-than-expected digital membership growth in 2021’s second quarter (6% compared with 16% last quarter and 23% in 2020) coupled with the drop off in traditional members led to disappointing sales of $311 million, well below our expected $345 million. WW’s adjusted gross margin was 61%, slightly higher than our expected 59%, but its adjusted operating margin was 21%, which was far short of our expected 27% due to a 36% increase in marketing. Overall, EPS was $0.12, which included unusual charges totaling $0.36 per share related to early debt extinguishment and restructuring.