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Jenny Craig Trims Fat After $3.8 Million Loss

La Jolla-based Jenny Craig Inc., the weight-loss service, said it will close 86 of its centers and eliminate 103 positions, including 26 at its headquarters as part of a restructuring to cut its costs.

The company made the announcement along with reporting a first-quarter net loss of $3.8 million for the three months ended Sept. 30, compared with a net profit of $2.5 million for the like period last year.

For fiscal 1999, which ended June 30, Jenny Craig lost $672,000, compared with a profit of $2.1 million for the previous fiscal year.

David Allen, director of research for the Granite Financial Group in San Diego, said restructuring moves could take Jenny Craig back to a break-even point or even modest profitability, but long-term profitability requires it boost its customer enrollment.

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Allen said the company has been hurt in recent years because of the absence of a recognizable spokesperson. Co-founder Jenny Craig has not appeared as the company’s spokesperson since she was in a car accident some 2 & #733; years ago, which resulted in a speech impediment.

The closed centers had revenues of about $4.5 million and operating expenses of $5.3 million.

Charges related to the center closings, fixed asset write-offs, and severance payments will result in a pre-tax charge of about $6.4 million for the current quarter, the company said.

Among the factors contributing to the most recent quarter’s loss were a $3.1 million charge on excess inventories and a charge of $789,000 in legal fees awarded to the plaintiff in a legal dispute involving its lease at its former headquarters in Del Mar.

In a Superior Court judgment, Jenny Craig was ordered to pay its former landlord $8.2 million. The company has appealed the judgment.

The layoffs and closures had little effect on Jenny Craig’s stock which has been trading at about $2.25 in recent weeks. Allen said that equals the company’s cash value plus its brand name. He called the stock a potential turn-around prospect that may be worth a speculative purchase.

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