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NutriSystem's CEO Discusses Q2 2012 Results - Earnings Call Transcript

In fact, we saw gross margins ratchet up each month of the second quarter, a very good early indicator that our strategy is sound. We anticipated that there would be a learning period for both customers and Nutrisystem alike once we flip the switch on the new rate card. Since we were introducing a new pricing strategy that customers had not seen before, it has taken us some time to optimize conversion.

In fact web conversion has been a challenge all year. We are seeing fairly good response across the board to our marketing efforts but conversion has been challenged as we educate new customers about the internal [ph] of the Nutrisystem program and now educate all of our customers new and returning about our new three-tiered pricing program. Mike Amburgey will talk in a moment about some steps we have taken to optimize conversion and how we expect to further leverage the new rate card in an upcoming new third quarter promotion.

You may have seen that we recently debut our enhanced Nutrisystem D for people with diabetes. There were a number of significant announcements that supported this initiative including the disclosure of promising new clinical data from a 2011 clinical study at Temple University and the University of Pennsylvania. As well as the announcement that Nutrisystem has been recognized as a National Strategic Partner of the American Diabetes Association.

We have also added certified diabetes educators in our contact center. So customers can consult with them at no charge if they have specific questions regarding our program. Although we plan to ramp up these efforts in conjunction with back to school messaging later this summer, we’re already seeing some impact with the nice uptick in Nutrisystem D sales in the month of July.

As we discussed with you last quarter, we are also excited about our expansion into the retail channel this quarter. Nutrisystem Everyday is now on the shelves of all 2,200 Kroger stores all throughout United States with 12 individuals SKUs of healthy snack, shakes and breakfast items. The revenue contribution in the second quarter was in line with expectations and now that we have fully stocking our Kroger stores we are beginning to invest in product promotional efforts. We are finalizing placements with a number of other retail outlets and we plan to provide additional update on our next call.

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