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Weight Watchers Plunge 14% On Weak Guidance, But Q4 Results Top Estimates

Shares of Weight Watchers International, Inc. (WTW) plunged more than 14 percent in extended trade on Wednesday after the weight management services provider issued earnings guidance for the full-year 2013, below Street view, citing weak recruitment trends seen in 2013.

The company also reported a profit for the fourth quarter that declined 9 percent from last year, hurt by higher general and administrative and marketing expenses incurred in support of strategic growth initiatives and higher medical benefits expense.

However, earnings per share and quarterly revenues topped analysts' expectations.

"Our current marketing has not been as effective in this tough economic and increasingly competitive environment. In this context, we are taking appropriate steps to address these near-term challenges while continuing to pursue our long-term growth strategies," President and CEO David Kirchhoff said in a statement.

The New York-based company reported net income of $58.0 million for the fourth quarter, down 8.9 percent from $63.7 million in the prior-year quarter, while earnings per share increased 20.4 percent to $1.03 from last years $0.86 on lower share count amid stock repurchases.

Excluding a one-time net benefit related to the company's settlement of UK self-employment tax litigation, adjusted net income for the latest quarter was $53.9 million or $0.96 per share.

On average, 7 analysts polled by Thomson Reuters expected the company to report earnings of $0.87 per share for the fourth quarter. Analysts' estimates typically exclude special items.

Revenues for the quarter grew 1.7 percent to $407.9 million from $401.30 million in the same quarter last year, and topped six Wall Street analysts' consensus estimate of $397.56 million by a whisker.

The growth in revenues were attributable to growth in the WeightWatchers.com business globally, partially offset by lower sales in its meetings business amid weaker volumes in North America and the UK.

The company's total paid weeks grew 4.5 percent over last year, with Online paid weeks increasing 18.0 percent, while meeting paid weeks declined 7.9 percent.

Internet revenues at WeightWatchers.com grew 17.6 percent to $117.6 million from a year ago, with both Online paid weeks and active Online subscribers rising 18.0 percent.

"While 2012 set a Company record for combined global meetings members and global Weight Watchers Online subscribers, we have been disappointed by our recruitment trends thus far in 2013," Kirchhoff added.

For fiscal 2012, the company reported net income of $257.4 million or $4.23 per share, compared to $304.9 million or $4.11 per share in the prior year. Excluding items, adjusted net income was $253.3 million or $4.16 per share. Revenues for the full year edged up 0.4 percent to $1.83 million from last year.

Street was looking for full-year 2012 earnings of $4.08 per share on annual revenues of $1.82 billion.

Looking ahead to fiscal 2013, Weight Watchers currently expects earnings in a range of $3.50 to $4.00 per share. Street is currently looking for full-year 2013 earnings of $4.75 per share.

WTW closed Wednesday's regular trading session at $54.11, up $0.17 or 0.32% on a volume of 1.01 million shares. However, the stock plunged $7.71 or 14.25% in after-hours trading.

by RTT Staff Writer

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