Medifast Inc., an Owings Mills-based maker and provider of weight-loss programs, said Thursday it would replace its chief executive officer next week with the company's board chairman.
The employment agreement for Michael S. McDevitt, the current CEO, expires Wednesday, and he and the board mutually agreed not to renew his contract, the company said. McDevitt led the company during a period of growth over the past five years; he had joined Medifast in 2002.
McDevitt will be replaced by Michael C. MacDonald, a board member since 1998 and executive chairman since November. MacDonald most recently was an executive vice president at Office Max Inc., where he led a $3.6 billion business unit, Medifast said. MacDonald will take over as CEO on Wednesday.
Although the stock has slumped this year, "the story of the CEO changeover is to consolidate control within the MacDonald family," said Gary Albanese, a senior equity analyst at Auriga USA who specializes in the beverage and weight-loss industries.
On Nov. 3, Bradley T. MacDonald — Michael C. MacDonald's older brother and the father of Medifast President Margaret MacDonald-Sheetz — resigned as executive chairman of the company's board because of health issues. Until McDevitt took over as CEO, Bradley Macdonald had been both chairman and CEO from 1998 to 2007.
In November, Michael MacDonald stepped into his brother's position, and now the younger MacDonald takes the reins as CEO as well.
The CEO change should not trouble investors much, Albanese said, because MacDonald has a long history with the company. He has been on the board since 1998.
An added reason for optimism, Albanese said, is that Medifast's 2012 plan is well established. The company is moving ahead with building 30 to 35 new weight-control centers this year, and training initiatives for weight-loss coaches are largely complete, allowing many of the company's employees to go back to increasing sales, he said.
Alecia Pulman, a spokeswoman for Medifast, said the end of McDevitt's contract offered "a natural transition for Mike MacDonald to take over the role of CEO for the next stage of growth."
A phone call to McDevitt was not returned Thursday evening.
In 2010, booming sales of weight-loss products led Forbes magazine to put Medifast on top of its list of the best small public U.S. companies. That year, McDevitt's pay was $1,655,550, up 34 percent from the year before. In 2009, he made $1,239,800. There were 19 Baltimore-area companies that paid their heads more than $1 million in 2010.
Early last year, Medifast's stock took a beating after the company delayed its fourth-quarter 2010 earnings report to remedy accounting issues, a move that then brought on legal problems. Although the company showed significant growth after the report was finally released, the earnings were not as good as investors expected and the company downgraded its first-quarter outlook, sending stocks further south.
Medifast has been in the diet industry for more than 30 years and employs 500 people in Maryland. Along with its headquarters, the company's food production facility — where shakes, meal bars and other diet foods are made — is also in Owings Mills. A distribution facility is on the Eastern Shore.
In 2010, the company's revenue was $257 million, up 52 percent from 2009. Competitors Weight Watchers International Inc. and NutriSystem Inc., had $1.5 billion and $510 million in revenue, respectively.
According to the company's most recent quarterly U.S. Securities and Exchange Commission filing, in the first nine months of 2011 Medifast revenue was almost $229 million, on track to surpass the prior year's revenue — though the fourth-quarter numbers will not be released for several weeks.
Profits for the first three quarters of 2011 were just over $17 million. Medifast's profit increased in 2010 by 72 percent, to $19.6 million, from $11.4 million a year earlier.
On Thursday, Medifast's stock opened at $16.38 and closed at $16.10. Its 52-week high was $27.82; the low was $12.97.
Gus G. Sentementes contributed to this article.
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