Fad-diet failures add heft to value of Weight Watchers

Quote from Weight Watchers Chief Executive Linda Huett, and the state of the diet industry

Chicago Tribune | Fad-diet failures add heft to value of Weight Watchers

NEW YORK -- At Weight Watchers International Inc.'s June investor conference, Chief Executive Linda Huett was asked whether there was a limit to how many online subscribers the company could attract.

"Is there a limit to the number of overweight people?" Huett replied.

As anyone who saw the film "Super Size Me" knows, America has a serious weight problem. The federal government estimates more than 60 percent of the U.S. adult population is overweight, providing Weight Watchers a large potential market.

But while everyone wants to be fit and trim, not everyone has time to attend Weight Watchers meetings. Plus, folks looking to lose weight often prefer a quick fix to Weight Watchers' blend of behavior modification and group support.

That's one reason the low-carb Atkins diet and others cut deeply into Weight Watchers' enrollment numbers, its main source of revenue, from 2002 until mid-2004.

Then a funny thing happened. Dieters became skeptical of the all-burger, no-veggie diet. The waning of the low-carb phenomenon was punctuated this month when privately held Atkins Nutritionals Inc., founded in 1989 by Dr. Robert C. Atkins, filed for Chapter 11 bankruptcy protection.

Meanwhile, Weight Watchers' North American enrollment growth has turned positive for the first time in more than two years. Profit, however, fell 35 percent in the second quarter, to $34.5 million, due to costs to acquire WeightWatchers.com Inc. The stock is up about 27 percent this year.

"Early in the year, you could see that advertising in the diet market was much less dominated by low-carb plans such as Atkins or South Beach," said Jerry Herman, a Legg Mason analyst. "That's been good for Weight Watchers."