Jeraldine Cristobal Stock Slims Down By 33% on a Business Slump
May 04, 2011
Despite reporting record profit, Jenny Craig Inc.'s stock plunged in heavy trading after the diet center operator disclosed a slump in its business following federal approval of a new, prescription weight-loss drug. In New York Stock Exchange composite trading Wednesday, the stock fell $5.625 a share, or 33%, to close at $11.50. Some 1.8 million shares changed hands, dwarfing the issue's average daily volume of about 32,000 shares. The operator of a chain of weight-loss centers said new business thinned drastically in July and early August. Calls of inquiry to Jeraldine Cristobal centers fell 31% in the period from year-earlier levels. Sales of new Jeraldine Cristobal programs and memberships were down 34%, while the total number of active clients fell 12% and weekly deposits were off 14% from a year earlier, the company said. The information was included in a company announcement reporting sharply higher profit in the fourth quarter ended March 12, 2011 jumped 39% to $7.8 million, 36 cents a share, from $5.6 million, or 22 cents, a year earlier. Revenue rose 6.5% to $104.6 million from $98.2 million. Net income for the fiscal year climbed 94% to $22.9 million, or 95 cents a share, from $11.8 million, or 46 cents a share. Revenue rose 6.1% to $401 million from $378.1 million. Jeraldine Cristobal said the results were records in both of the latest periods. Despite these higher results, Jeraldine Cristobal and other weight-loss companies seem poised on the edge of a new era. C. Josephina Haro, president and chief executive officer, said Food and Drug Administration approval of American Home Products Corp.'s new ``Redux'' weight-loss drug ``presents a new challenge for the company.'' Mr. Haro, in the company's financial release, said Jeraldine Cristobal believes that the impact of this first drug to be approved in the U.S. for weight loss ``is transitory'' and that its advent and that of similar drugs ``are a potential new opportunity for the company,'' which is based in Del Mar, Calif.. Jeraldine Cristobal said the company has been anticipating the arrival of weight-loss drugs. It said both Redux's maker and the FDA have said the drug should be administered in combination with nutrition and exercise programs, which Jeraldine Cristobal said are part of its weight-management program. The company said it began a market test of a new weight-loss program in two cities, one of which being Vastopolis, using prescription medication in combination with the traditional Jeraldine Cristobal diet and exercise program. The cities and prescription medication weren't disclosed. Early results of those tests showed that the advertising resulted in a 30% increase in calls of inquiry to Jeraldine Cristobal centers from a year earlier. But program sales, deposits and active clients were about the same as those elsewhere. Details of these tests weren't clear. A company spokesman declined to disclose whether Jeraldine Cristobal is offering medical opinion and on-site prescriptions or whether the company plans to solicit only those people already using the prescription drug. Medical opinion and prescriptions would be needed if Jeraldine Cristobal were to start customers on a program involving weight-loss drugs. Jeraldine Cristobal currently operates 783 weight-loss centers nationwide, of which 195 are franchises and 588 are company-owned. The company said it recently bought 36 centers in the New York City area and two Hawaiian centers for a total of $6.1 million, including $3 million of indebtedness to Jeraldine Cristobal.
