Morningstar

Weight Watchers CEO Resignation a Strategic Move?

CEO Jim Chambers' surprising decision may indicate that the board wants to find the appropriate person to oversee Weight Watchers' growth plans over the next several years.

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WW International Inc
(WW)

In a surprise move,

The timing of Chambers' move is unusual, as it comes after Weight Watchers had been gaining traction with its "Beyond the Scale" platform, upgraded technology platform, and Oprah Winfrey-led engagement efforts, and also ahead of the important 2017 winter recruiting season. However, after speaking with management, we do not believe Chambers' decision has anything to do with performance--in today's release, Hotchkin reaffirmed he expects the current quarter will be the fourth consecutive quarter of year-over-year member growth--or changes in the company's long-term strategies. Instead, we believe the move had more to do with the board wanting to find the appropriate person to oversee Weight Watchers' growth plans over the next several years.

There is no change to our $13 fair value, no-moat rating, or Standard stewardship rating based on the announcement. While CEO departures and interim management appointments always carry some degree of executional risk, we believe the interim CEO group brings a nice balance between financials (Hotchkin), operations (Semmelbauer), and shareholder alignment (Sobecki) to keep the company's near-term objectives on track. As for what we expect from a new CEO, we expect an external candidate with meaningful experience in the health/wellness industry with a willingness to explore new uses of technologies and marketing solutions.

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About the Author

R.J. Hottovy

Sector Strategist
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R.J. Hottovy, CFA, is a consumer strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He is responsible for consumer discretionary and staples research. He has covered the consumer sector as an analyst and director of global consumer equity research for Morningstar since joining the company in 2008, and specializes in a broad range of consumer categories including restaurants, footwear and apparel retailers, consumer electronics retailers, fitness clubs, home improvement and furnishing retailers, and consumer product manufacturers.

Before joining Morningstar, Hottovy was a director and senior stock analyst for Next Generation Equity and an analyst for William Blair & Co., specializing in a wide range of retail and consumer product companies. He also spent two years at Deutsche Bank, covering waste management, water utilities, and equipment rental stocks.

Hottovy holds a bachelor’s degree in finance and a second degree in computer applications from the University of Notre Dame, where he graduated magna cum laude. He also holds the Chartered Financial Analyst® designation and is a member of the CFA Institute and the CFA Society of Chicago.

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