WeightWatchers files for bankruptcy to ease debt amid increased competition

The American company is starting a slimming cure. The group, founded over 60 years ago, announced this Wednesday, May 7, that it was filing for bankruptcy to reduce its debt. "WeightWatchers is taking strategic actions to eliminate $1.15 billion of debt and strengthen its financial position for long-term growth and profitability," the company explained in a press release. Executives anticipate that WW International will remain listed on the New York Stock Exchange, where the stock nevertheless collapsed by more than 40% on Wednesday around 5:55 p.m. in France.

The company voluntarily filed for bankruptcy protection in a Delaware court (East), after reaching an agreement with the required supermajority of its creditors for this "financial reorganization." These creditors represent more than 72% of the company's debt. Under this agreement, which is expected to be validated by the courts within forty days, its debt will be reduced by $1.6 billion, currently at $465 million. Annual interest will fall by half, to approximately fifty million dollars.

"This transaction will significantly strengthen our financial foundation," said Tara Comonte, CEO of WW International, during a conference call with analysts, emphasizing that it was a "critical first step in resetting our capital structure." And the reduced debt burden "will directly improve our cash flow and our ability to invest in our business," she said.

Founded in 1963, Weight Watchers, renamed WW International in 2018 to mark a strategic shift toward promoting wellness beyond weight-loss programs, had 3.4 million members worldwide as of the end of March.

According to its first-quarter results, announced Tuesday evening, this represents a decline of 14.2% year-on-year. Revenue also fell (-9.7%), to $186.6 million, but its net loss narrowed sharply, to $72.6 million from $347.9 million a year earlier.

"In a rapidly evolving weight management environment, we believe our unique combination of science-based behavioral support, clinical care and people-to-people engagement positions us to deliver better performance," said Tara Comonte.

The group's woes come amid the resounding success of new GLP-1 anti-obesity drugs, including Ozempic and Wegovy from Denmark's Novo Nordisk, and Zepbound from the US company Eli Lilly. In late April, WW announced a partnership with drug supplier Gifthealth to make Zepbound easier for its members to access. "We found that members taking anti-obesity medications, in conjunction with our behavioral program, lost 11 "% more weight than those taking the drug alone," Comonte said. She said studies have also shown that patients without support regained two-thirds of the weight they lost within a year of stopping GLP-1.

In addition to this pharmaceutical competition, the group is also suffering from the proliferation of weight-loss methods, particularly online. This represents a "challenge" in attracting new members for certain products, admitted Felicia DellaFortuna, CFO, during the conference call.

"WeightWatchers used to be the leading destination for those wanting to lose weight, but the world has changed," commented Neil Saunders, director at GlobalData, believing that the many competitors (programs and medications) had made the group "less prevalent." "Unfortunately, in addition to this loss of interest, it has also had to juggle very high levels of debt," he stressed. According to him, the bankruptcy filing "will solve some financial problems, but it will not automatically create a more defensive and sensible business for consumers."

WeightWatchers suffered a significant blow when its most prominent shareholder, former American television personality Oprah Winfrey, announced in February 2024 that she was stepping down from the board after nearly a decade. The stock had lost more than 18% on the stock market that day. She also planned to donate her shares, or their proceeds, and the exercise of options to the National Museum of African American History and Culture (NMAAHC) in Washington.