Nutrisystem Inc. has a cable news problem.
The weight-loss company is struggling to attract customers during the annual diet season that follows the New Year’s holiday. It’s attributing this, partly, to a ratings decline at major cable news networks including Fox News and CNN. The lack of viewers rendered its advertising less effective, which weighed on results in the first part of 2018, the company said.
With fewer eyes on its commercials, Nutrisystem issued a weak
forecast that sent its shares plummeting on Tuesday.
“We underestimated the viewership shift away from certain news stations in a post-inauguration January and February time frame,” Dawn Zier, the company’s chief executive officer, said on an earnings call after the results were released late Monday. “We did not spend and optimize our media mix as quickly as we could have, eyeballs shifted to other stations, and that data wasn’t readily apparent until the last week or so.”
Nutrisystem shares dropped as much as 29 percent to $28.50 on Tuesday, the biggest intraday decline in seven years. The company expects earnings per share to be 3 cents to 8 cents in the first quarter, well below the Wall Street estimate of 28 cents.
The company said its marketing efforts in January and February, when many dieters try to lose weight, were “fatigued” and this was exacerbated by lower ratings on cable news networks.
While the networks broke viewership records last year thanks to interest in the Trump presidency, audiences at CNN and Fox have fallen so far this season. CNN is down 30 percent in prime time in the 25-to-54 demographic coveted by advertisers, while Fox News has declined 18 percent. MSNBC, however, is up 19 percent.
Still, Fox News was the most-watched cable network in prime time last week, averaging more than 2.2 million viewers, according to Nielsen.
Brands buy much of their commercial time months in advance each spring in what’s called the upfront market, hoping to lock in lower rates. But as TV ratings have declined across nearly every channel, advertisers are often paying higher prices to reach smaller audiences. That’s because they have few options besides TV to reach a large audience.
Nutrisystem had been on a roll under Zier, who took over in late 2012 when the company’s shares wallowed around $8. The stock gained 52 percent in 2017, closing the year at $52.60. Even before the decline on Tuesday, the shares had dipped 24 percent this year.
Competitor Weight Watchers, which will report results after the market closes on Tuesday, has bounced in the opposite direction —
gaining momentum with a comeback spurred by Oprah Winfrey. The media mogul bought a stake in the company in 2015 and has been a key presence in its advertisements. After years of declines, Weight Watchers has been adding customers and its stock has surged about 60 percent already this year.