How does a low-carb replacement meal diet company rationalize making less money than the year before without sugar coating the news?
It doesn't.
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Medifast brought its cotton candy spin machine
to the company's 2014 Q4 conference call |
Medifast net revenues decreased 12% to $285.3 million in fiscal year 2014, compared to $324.1 million in 2013.
On Thursday Medifast CEO Michael MacDonald spun the disappointing financial results like so much cotton candy, acting like it was part of the company's master plan.
Despite his optimism, many investors reacted to the news by dumping their Medifast stock, resulting in a 4.76% decline from the day before.
Worse, Medifast stock (ticker: MED) is down 17% from its all time high of $35.76 in May 2010.
The company's two main revenue channels -- Take Shape For Life and Medifast Direct -- saw revenues decline 10% and 24%, respectively.
Yet, despite the gloom and doom, Medifast may be heading in a better direction these days.
The company closed its corporate-owned Medifast Weight Control Centers in 2014 while retaining its more profitable franchised centers.
Now the Maryland-based company can focus more attention on its two most profitable channels, Take Shape for Life and Medifast Direct.
Since I used to be a Take Shape for Life health coach, I am pleased to see that more resources are going to be invested in this key area, which accounts for almost 75% of Medifast's total revenues.
Medifast President Meg Sheetz cited simplification and improved messaging as the division's
two main strategies to resurrect TSFL:
While our initiatives include introducing new
online coaching tools, changes in messaging alone can have a positive
impact. One of our initial simplification efforts this year was our
February incentive campaign, Each One, Reach One, which required a
health coach to accomplish two simple tasks to teach behaviors that will
help them grow. When sponsoring a new coach with a qualifying BeSlim
Club order, we challenge that coach to immediately gain a new client who
also places a qualifying BeSlim order.
It's easy to understand,
we're very pleased that February was our strongest coach acquisition
month since mid-2013. Our next delivery will be to transform our coach
sign-up process into a single step allowing the coach to join and get
started right away.
I still keep in touch with many TSFL health coaches and sympathize with the frustrations they've had in dealing with Medifast corporate.
For starters, the technological interface and coaching tools are glitchy and cumbersome. As a health coach, I couldn't use my primary email address because there was a hyphen in the domain name that confused the software.
And despite serving as a virtually free sales force for the company, the vast majority of TSFL health coaches are not always treated with the respect and gratitude they deserve for helping to make Medifast a household name.
When Medifast shuttered its remaining corporate centers in 2014, for instance, the company
rewarded only a select few TSFL health coaches with the suddenly orphaned clients instead of sharing the wealth with more of its dedicated, hard-working coaches.
Sheetz said the TSFL branch of the company will make it clear to health coaches that the best way to earn commissions will be to enroll new health coaches instead of just taking on more new new clients.
I can tell you that just coming off of an incentive trip we had
this past weekend, many of our leaders who spent a majority of last year
really trying to move from high frontline volume into really building
depth are actually feeling a turning point in their income right now.
The focus on recruiting new health coaches makes sense for the company since health coaches are like missionaries who spread the Gospel of Medifast to the masses.
Health coaches also prop up the company's bottom line since they are more likely to continue buying and using the product after losing their weight.
And from my personal observations, Medifast losers who become TSFL health coaches are more apt to maintain their ideal body weight since they must remain credible role models to their clients.
Though CEO Michael MacDonald bragged about 2014 being the biggest year for releasing new products, there were more misses than hits.
Popcorn that costs more than Filet Mignon and chichi water infusers were both greeted with a big shrug. And though palatable and doable in a pinch, the Medifast Flavors of Home Lean & Green meals, such as
Turkey Meatball Marinara, are not much better than army MRE.
So, yeah, Medifast has a ways to go to right the ship. Like halting price increases, introducing new tasty foods (like the gingerbread soft bake), overhauling the IT infrastructure and treating all TSFL health coaches with more respect.
And considering rival diet company Weight Watchers is new to the whole personal coaching thing, its recent TV commercials promote the coaching concept far more effectively than Medifast, whose
recent TV commercials did not pass the DVR fast forward test.
Despite some of its recent bonehead moves, my fingers are still crossed that Medifast will succeed and stick around to help more people lose weight and gain healthy new habits. Given its renewed focus on the company's main selling channel TSFL, I'd bet my own money on a brighter future for Medifast in the coming year.
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