Why Weight Watchers Shares Lost a Ton

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Weight Watchers International plunged 18% today after the weight management specialist posted disappointing third-quarter results and suspended its dividend.

So what: The stock has plunged in 2013 on deteriorating fundamentals, and today's third-quarter results -- earnings fell 10.5% while revenue sank 8.5% -- coupled with management's move to suspend the dividend suggest that the trend is only getting worse. While Weight Watchers is suspending its dividend to help preserve capital, the move itself raises plenty of worry over its financial condition and forces income-oriented investors away from the shares.

Now what: Management now expects fourth-quarter revenue to be down low double-digits given the poor recruitment trends. "While we are working aggressively on both near-term commercial activities and longer-term strategic initiatives, 2014 will be a very challenging year," cautioned president and CEO Jim Chambers. "To maintain financial flexibility and fund the Company's transformation, the Board has elected to suspend the dividend." Of course, with Weight Watchers shares now off almost 50% from its 52-week highs, much of that uncertainty might already be baked into the valuation. 

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The article Why Weight Watchers Shares Lost a Ton originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool owns shares of Weight Watchers International. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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