It is unclear if investors were more looking forward to Weight Watchers' earnings or the company's announcement of what Oprah's weight will be today...
Today at 5pm WTW will reveal Oprah's latest weight
— zerohedge (@zerohedge) February 25, 2016
...which ever since her massive investment in October 2015 has been the key driver behind the stock, but unfortunately for longs it was nothing but dead weight moments ago when WTW reported an EPS loss of $0.03 while consensus was looking for a 2 cent beat. This drop occurred even though the company actually beat on revenues, reporting sales of $259.2 million, above the consensus of $257.7 million, a 20.9% drop from a year ago.
The decline in earnings probably had something to do with this:
Fourth quarter 2015 operating income decreased 56.8% on a constant currency basis versus the prior year period. Excluding the $13.6 million of one-time transaction expenses associated with the Company entering into a partnership with Ms. Winfrey and the 2015 plan restructuring charges of $1.3 million from Q4 2015 and excluding the 2014 plan restructuring charges of $1.0 million from Q4 2014, Q4 2015 operating income would have decreased 23.3% on a constant currency basis versus the prior year period. The operating income decline was driven primarily by lower revenues partially offset by lower marketing and selling, general and administrative expenses.
In other words, while Oprah was buying WTW stock, she was also actively getting paid by WTW to promote not only the company but her own interest in the company.
In any event, while the company was optimistic on the future, reporting an EPS guidance of $0.70-$1.00 for 2016 versus consensus of 81 cents, what spooked markets is that its 2.39 million subscribers was a 4.8% decline from the 2.51 million a year ago, suggesting Oprah was unsuccessful in carrying her weight and providing the popularity boost that the company so very much needs.
The bottom line for Weight Watchers stock: the drop in subscribers is weighing on the stock leading to a heavy plunge after hours following the big fat earnings miss.