The Nattering Naybob examines the "Oprah Winfrey effect."
Oprah's Sphere of Influence
Courtesy of The Nattering Naybob at Seeking Alpha
Summary
- Analysis of Oprah's brand demographics, statistics, sponsors and "sphere of influence."
- Analysis of Oprah's likely near-term effects on Weight Watchers sales.
- Analysis of Oprah's Midas touch which turns everything to gold.
Excerpt:
Since 2011, Weight Watchers had lost 92% of market valuation. On Friday Oct 16, Oprah was vested with 10% or 6.4M of outstanding shares at 6.90. Monday Oct 19, the announcement hits the street and WTW shares soared 100%, netting Ms. Winfrey $40M, while grossing $80M, in a single day. On Tuesday Oct 20, more retail investors piled in as WTW closed at 18.24 (+31%). Shares eventually closed the week at $15.74.
Oprah has options to increase her position from 10 to 15% for $6.90/share. Her 10% is completely locked up for two years with options to sell 15% in year 3, 30% in year 4 and 100% in year 5. As of Sept 30, 25% of the float on WTW shares was short, meaning those shorts will probably need to cover at some point, driving the price up further. (I wonder if anyone took out long options prior to the over-the-weekend announcement. Nah, nobody would ever do that.)
Although Ms. Winfrey's show has been off the air since 2011, it would be unwise to underestimate the "Oprah effect."
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Narrowing the focus to Ms. Winfrey's potential near term effects on WTW: WTW's weight-loss program already has a low entry point. At $377, it costs the least of its alternatives, i.e. Jenny Craig, Vtrim, NutriSystem (NTRI).
The following is a conservative hypothetical. If just 1M of Ms. Winfrey's fan base buys $100/mo in the WTW program food, the resulting $1.2B in sales would almost double WTW 2014 sales of $1.5B; on which WTW grossed $800M (53% GPM) and netted $117M (7.8% NPM).
