Update on NutriSystem and Harley Davidson

NutriSystem recently announced the acquisition of Nu-Kitchen, a health oriented food delivery service in the New York city area. NutriSystem plans to expand the freshly prepared meal service to the north eastern part of the United States, and looking to take it nationally. The stock has responding nicely on the news, however there are a few things to keep an eye on:

1. The terms of the deal weren't announced. At last check, NutriSystem had $42.9 million in Cash and equivalents. We'll have to wait until the Q2 earnings report to get a better picture on this investment.
2. I never heard of Nu-Kitchen before, obviously because they only serve New York city. And therein lies the challenge for NutriSystem. Freshly prepared health based meals cater to the New York city crowd. I used to live/work there and this service makes sense for those that want to eat right, but don't have the time because they are working and partying hard in the Big Apple. Now if you head out to Debuke, it is simply going to be a tough sell. NutriSystem will probably do well with this new product/service line in the major metro areas. The current business as is will need to be rigged for scalability. Nu-Kitchen's current Nutritionist Penny Geller, and Executive Chef Atusko Boyd simply won't be enough to scale nationally. Shelf stable NutriSystem kits and Freshly Prepared Meals are two different animals. The logistics of managing a service like this nationally from the ground up won't be easy. I'd expect NutriSystem to hire someone that knows how to manage fresh/meal management at a national level as they look to expand.

In one of our other holdings (HOG), Harley Davidson recently announced layoffs of about 700 people company wide and then follows up today with the announcement of the purchase of Italian motorcycle maker MV Agusta Group for approximately $25 million Euros, and also assume $45 million Euros of the company's debt... ouch. The layoffs I understand, the acquisition not readily so. I'll see if I can make sense of both of these acquisitions in future posts.

Disclosure: I own NTRI and HOG