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WW International Inc WW

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No-Moat WW Undershoots Q2 Revenue Expectations as Member Growth Slows; Shares Cheap

Jaime M. Katz, CFA Senior Equity Analyst

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.

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Company Profile

Business Description

WW International (formerly Weight Watchers) is a leading player in the $70 billion-plus global weight-management industry. As of December 2020, the company had 700,000 active meeting subscribers worldwide (run by over 7,000 meeting coaches) and 4.3 million active digital subscribers . The company encourages healthy weight loss through exercise, nutrition, and portion control, with aspirations of evolving into a more holistic health/wellness provider. WW also offers online 24/7 Expert Chat and personal coaching weight-management solutions, and has recently expanded into healthcare and diabetes management.

Contact
675 Avenue of the Americas, 6th Floor
New York, NY, 10010
T +1 212 589-2700
Sector Consumer Cyclical
Industry Personal Services
Most Recent Earnings Jun 30, 2021
Fiscal Year End Jan 2, 2022
Stock Type Slow Growth
Employees 10,000

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