Monday, October 5, 2009

Nutrisystem announces a decent new distribution partner (NTRI, WMT)

That's an understatement.

In an after-hours press release, weight-loss outfit Nutrisystem (NTRI) announced that their products will be rolled out in 3,200 Walmart (WMT) locations this week. I love the mention of the "New Year's resolution season:"
Hitting shelves at the brink of the holiday rush and leading into the height of the 2010 New Year's resolution season, the Nutrisystem 14-Day Starter Program will start rolling out nationwide at over 3,200 Walmart locations the first week of October, and will be available on

"Our alliance with Walmart is an extension of our goal to consistently offer consumers a convenient, affordable and effective weight loss option," said Will Auchincloss, Senior Vice President of Business Development at Nutrisystem. "Walmart provides us with a new and valuable distribution channel to broaden our customer base and build awareness of our product at the retail level."
This is great news for the company, and they could use some. A peek at the most recent 10Q shows that weight-loss products are very "discretionary," as results for the fist six months of this year are dramatically worse than a year ago:

...And management's discussion of the weaker results:

Based on last year's approximately $50million number, the company's Free Cash Flow Yield (FCFY) would be about 13% on it's net-of-cash market value. However with earnings per share dropping from 1.75 to maybe 1.00 this year, we're looking at FCFY of 7%. However that's before a BIG boost from this new Walmart distribution deal. I imagine the margins are weaker than the company average, but upside in volume should dramatically increase earnings and cash flow.
The stock is up to 18.85 in late trading after closing at 15.00. Today NutriSystem saw VERY heavy volume headed into the close of trading...leaky information on this deal?
The stock, up 25% after hours, is heavily shorted, with about 7.5million of the outstanding 31million shares sold short. Not fun to be on their end of this...

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