Will a Slimmed-Down Celebrity Fatten Returns at Nutrisystem?

Nutrisystem (NTRI) executives are all atwitter about a formerly overweight, “internationally-recognized, A-list star” they signed to gush about how its diet made her skinny. The company promises a “market-moving” announcement with the name of that newly-svelte woman, as well as a perhaps-less-sensational male spokesperson, any day now. That’s great, because Nutrisystem really needs to do something spectacular – maybe get a lot of pounds off of a Queen Latifah or Alec Baldwin – to keep its shareholders from becoming the Biggest Losers on Wall Street. Nutrisystem shares are down some 40% this year, a particularly humiliating fall in light of the 60%-plus rise in competitor Weight Watchers International (WTW).

Nutrisystem Stock Chart by YCharts

The new spokespeople are part of a big remake at Nutrisystem, which rocketed to popularity last decade with a rigid but low-maintenance diet. The company mails the customer prepackaged meals and snacks that represent every morsel of food meant to be consumed on a 28-day regime. It also offers a heavy dose of encouragement with before-and-after photos and testimonials from Marie Osmond and Dan Marino and the like, as well as a lot of non-celebrities.

The new Nutrisystem will offer revamped recipes, personalized plans for maintaining weight loss, and more short-term Nutrisystem meal plans in Wal-Mart stores. And the next versions of Marie and Dan, whoever they are, ostensibly will rally the overweight to telephones again to spend $250-plus on that mail-order 28-day program.

For investors, the makeover offers a conundrum: does the desire to be thin and the power of celebrity endorsement really trump the drag of a weak economy and the popularity of Weight Watchers? If it does, the new Nutrisystem represents an opportunity to buy into a business that will surely get a boost after all those New Year’s resolutions kick in. YCharts Pro gives Nutrisystem great scores for both fundamentals share valuation.

But there is little to find in Nutrisystem’s numbers lately that would encourage buying its shares. Revenues have fallen pretty steadily for the past three years, and profits are in steep decline.

Nutrisystem Revenues TTM Chart by YCharts

The company cut prices earlier this year to boost sales and did beat analysts’ sales forecasts first quarter. It paid dearly for that bit of good news.

Nutrisystem Gross Profit Margin Chart by YCharts

Nutrisystem’s dividend offers an enticing 5.86% yield, but that’s because it’s questionable how long the company can continue to pay it.

Nutrisystem Earnings per Share Chart by YCharts

Most analysts that follow Nutrisystem now believe in this remake and recommend buying the shares. But it’s Weight Watchers, backed by corporate accounts and independent research touting its program, that’s getting the business from dieters these days.

Weight Watchers International Revenues TTM Chart by YCharts

Nutrisystem has blamed its poor financial results in recent years on general economic weakness, pointing out that its sales are always tied closely to the shape of a consumer confidence chart. It’s true, but not reassuring at a time when the economy is still weak and the timing of any recover still uncertain. It’s also notable that Weight Watchers doesn’t seem to have this problem.

Dee Gill is an editor for the YCharts Pro Investor Service which includes professional stock charts, stock ratings and portfolio strategies.