One of the reasons J.P. Morgan downgraded WW, formerly Weight Watchers International Inc., to neutral from overweight is because the diet club is losing market share to health-and-wellness app Noom, and the threatening startup is on the pricier end of subscription rivals.
J.P. Morgan said channel checks show that the New Year’s resolution enrollment period is off to a slow start, which could prevent WW from reaching its goal of $2 billion-plus in revenue by the end of 2020.
J.P. Morgan slashed its price target to $37 from $70.
About 80% of WW’s revenue growth is expected to come from membership and retention. WW
had 4.2 million subscribers as of the end of Q3 2018.
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“We previously highlighted concerns that WW may be unable to reach their 2020 revenue target if consumers continued to aggressively shift towards using a digital-only subscription over the traditional digital + studio membership, which commands a high monthly fee,” wrote J.P. Morgan.
Noom is an app-based health-and-wellness company that creates personalized plans to help users lose weight, exercise and reach other goals that are popular during these early weeks of the year.
“While our analysis indicates broad traffic declines across WW’s historical competitive set including Nutrisystem, Jenny Craig, South Beach, etc. one notable company bucking the trend is called Noom,” J.P. Morgan said. “While this program is more expensive at $44.99 per month versus WW’s digital membership at $19.95 per month, the brand is gaining significant traction as per SimilarWeb data.”
On its website, Noom emphasizes the role that technology plays in making the pursuit of a healthier lifestyle more enjoyable. Executives in the health, wellness and fitness space say the same.
“For the first time, the studio experience is in your home,” said Brynn Putnam, founder and chief executive of Mirror, an at-home gym product that looks like a full-length mirror when it’s off, but turns into a fitness class when activated. Workouts range from boxing to barre to yoga.
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“Working out in home historically has meant sacrificing quality for convenience,” said Putnam. “Like a big piece of equipment in your living room and VHS tapes with stale or impersonal content.”
Mirror technology also creates customized regimens, says Putnam, who calls Mirror a media company “that creates original content and a unique delivery system with the Mirror platform.”
Traditional health clubs and weight-loss companies also recognize the need to keep up with digital advancements and the consumer need for camaraderie and ease of use.
“While fitness fads come and go, Planet Fitness continues to see a strong demand for what we offer, and we believe consumers are always going to want to exercise in a community setting,” said Planet Fitness Inc.
vice president of public relations and communications, McCall Gosselin, in a statement sent to MarketWatch.
“Our online community Planet of Triumphs, like our ‘Judgement Free Zone,’ is another place where our members have the opportunity to cheer each other on and share success stories in a supportive space.”
Planet Fitness also highlights the low cost of its membership, which has a $10 price point. J.P. Morgan, suggests that cost may be another reason for WW’s shortfall early in the year, particularly in light of the partial government shutdown and furloughed workers.
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Planet Fitness shares have soared 75% over the past 12 months.
“Our latest study confirms that convenience is increasingly a driving factor in one’s overall health journey: nearly three in five Americans report spending seven hours or more planning and preparing meals each week, and nine in ten people believe that having healthy, pre-prepared meals would help them lose weight,” said Monty Sharma, chief executive of weight-loss company Jenny Craig, in a statement.
Sharma talked up the “Jenny Craig Anywhere” option, which offers “premium” food, home delivery, and “personalized one-on-one” consulting via phone or video chat.
These new, personalized options are also meant to address the time crunch that many people feel in their daily lives.
“Your commitment to your fitness goals improves when you don’t have to travel to and from the gym,” said Nate Bosshard, chief marketing officer at Tonal, a digital weight machine that comes with a screen that provides personal training and a variety of routines.
“Since Tonal replaces every machine you would encounter in the gym, you no longer have to wait your turn for a machine when the gym is busy,” Bosshard said.