Pick The Right Fitness Stock For Your Resolutions
NEW YORK ( TheStreet -- Picking a fitness related stock for your portfolio in January seems like a no brainer. Lots of people make a New Year's resolution to get fit or lose weight. So it would follow that consumers would spend more money with these companies and that would result in strong sales for the first quarter in 2013. Unfortunately that isn't the case. The only thing that will get lost is probably performance.
According to USA.gov, three of the top ten resolutions are related to health matters - eating better, losing weight and getting fit. Statistic Brain said the number one resolution for 2012 was losing weight, however only 8% are successful in achieving that goal. Only half make it past six months.
Weight Watchers (WTW) stock is up 5.6% already for the year as some investors are sure that the company will deliver positive results in the first quarter. The problem is that Weight Watchers is hurting from a fundamental change in the approach to weight loss: the smart phone effect.
Weight Watchers predominantly makes money off of its meeting fees and the products sold at these meetings. This source of revenue has declined as many consumers are opting for free mobile apps. Many of these apps provide support forums, goal oriented calendars and even calorie counters eliminating the need for a points program.
Most people have a smart phone with them everywhere they go and it's so simple to track food intake or log exercises. Weight Watchers recognized this and didn't ignore the mobile trend. It has its own mobile offering and that includes an online meeting with fees. This feature has increased for the company, but it's less lucrative than the in person meeting. Weight Watchers is also trying to capture the corporate business, in response to wellness incentives that are part of the health care mandate. Unfortunately that is not making very much money yet and it remains to be seen if it ever will.
It also doesn't help that WTW is a seasonal company and this time of the year is crucial for the company. Its main ad campaign for the beginning of 2013 was supposed to feature Jessica Simpson. Simpson is very popular and had gained lots of weight with her pregnancy. She was paid millions to star in the campaign with hopes of a Jennifer Hudson like success. The campaign has been tossed though because now Simpson is pregnant with her second child and she is officially off the diet. A pregnant Kim Kardashian offered to step in and Weight Watchers graciously declined. There is no replacement star for now and the company has lost valuable marketing time.
Next is the fitness club play. Everyone that belongs to a gym knows the first week in January is awful because it is so crowded with resolution people. They also know these same people will drop out. The American Council on Exercise reported that 50% of novice exercisers drop out within the first six months. Health clubs expect a 20-30% drop out rate from the New Year's resolution crowd within 90 days.