WeightWatchers 2009 Annual Report Download - page 49

In fiscal 2008, Continental Europe experienced a 4.1% decline in meeting attendance versus the prior year.
However, the introduction of Monthly Pass in Germany in the third quarter of fiscal 2007 and in France in April
2008 helped drive an overall 16.5% increase in paid weeks for fiscal 2008 in Continental Europe versus the prior
year. In fiscal 2009, Continental Europe experienced an 11.8% decline in meeting attendance and paid weeks
growth of 1.6% versus the prior year. Most of our markets in Continental Europe were affected by the difficult
economic conditions in fiscal 2009. In addition, in fiscal 2009, we re-evaluated the meeting base in a number of
countries, including Germany, closing weaker meetings and building on stronger meetings for a better meeting
experience for our members. This has resulted in better economics for our service providers and higher gross
margins. This stronger foundation creates a better platform from which we can grow as the economy rebounds.
During fiscal 2009, the management teams in Continental Europe also prepared for a major new innovative
program, ProPoints, which soft launched in the fourth quarter of fiscal 2009.
WeightWatchers.com
The continued success of WeightWatchers.com resulted in the number of online paid weeks almost
doubling, from 21.4 million in fiscal 2005 to 42.7 million in fiscal 2009. This success is due largely to the
acquisition of new Weight Watchers Online subscribers in the United States as well as the launch of
WeightWatchers.com subscription products in new markets globally.
Gross Margin
The Company has maintained an annual gross margin of 50% or more since fiscal 2001. Our staff is usually
paid on a commission basis and space is typically rented as needed. Moreover, we adjust the number of meetings
according to demand, including seasonal fluctuations. This variable cost structure has enabled us to maintain
these high margins even as we have expanded the number of our meetings over this period and experienced a
decline in the number of attendances per meeting. When our attendance growth outpaces our meeting growth, our
gross margins typically improve. As WeightWatchers.com continues to grow, we expect margins to continue to
expand in this highly scalable business.
Operating Margin
The Company has consistently generated operating income margins of 30% or more from fiscal 2001 to
fiscal 2007, even while making significant investments in strengthening our management teams, particularly in
North America and Continental Europe, putting in place a stronger global marketing infrastructure, increasing
our investments in marketing and information technology and expensing share-based compensation beginning in
fiscal 2006. In fiscal 2008, the operating income margin of the Company dipped below 30%, to 28%, due largely
to the adverse U.K. VAT ruling received in the second quarter of fiscal 2008 and the start-up costs of our China
Joint Venture. In fiscal 2009, the operating income margin of the Company dipped below 30%, to 26%, due
largely to the adverse U.K. tax ruling relating to the self-employment status of its U.K. leaders.
Performance Indicators and Market Trends
Our management reviews and analyzes several key performance indicators in order to manage our business
and assess the quality and potential variability of our cash flows and earnings. These key performance indicators
include:
• net revenues, which are an indicator of our overall business growth;
• attendance and paid weeks metrics;
• meeting fee revenue per attendee and in-meeting product sales per attendee;
• the number of Weight Watchers Online subscribers; and
• operating expenses as a percentage of revenue, which are an indicator of the efficiency of our business
and our ability to manage our business to budget.
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