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12 May 2024
Planet Fitness increases price of basic membership for first time in over 20 years
BY
Kath Hudson
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Planet Fitness is expecting to open 140-150 sites this year
photo: Planet Fitness
Planet Fitness has announced the repurchase of 314,000 shares at a rate of US$20 million. The Class A common stocks were repurchased and retired, using cash. The company has also reported growth in its first quarter financial results, which showed total revenue increased by 11.6 per cent to US$248.0 million, compared to Q1 last year.
Store sales grew by 6.2 per cent, to US$1.2 billion and adjusted EBITDA increased by US$16.1 million to US$106.3 million, compared to the same period last year..
Twenty five new stores were opened: 23 franchisee-owned and two corporate-owned, bringing the total to 2,599 on March 31, with 19.6 million members.
The company has announced it will increase its Classic membership charge by 50 per cent in Q2 this year for new joiners, from US$10 to US$15 – the first increase in more than 20 years. This membership gives people access to one location.
The company also offers a Planet Fitness Black Card membership which allows access to more locations, as well as other benefits, for US$25/month. This fee isn't increasing, although the company has said it will quietly model and market-test increases to this category.
The average US gym membership price is US$50/month.
Craig Benson, interim CEO, said the company had started testing both US$12.99 and US$15.00 price points in 2023, with the latter found to be optimal, leading to an increase in average revenues per gym "with the least impact to the rate of joins”.
Benton didn’t mention the impact the recent locker room controversy had on shares, when they took a US$400 million dive, but talked about other challenges: "During the quarter, we faced several headwinds which impacted our results, including a shift in consumer focus in the New Year to savings and concern over the increase in COVID infections and other illnesses, as well as a national advertising campaign that we believe may not have resonated as broadly as we had anticipated. As a result of these and other factors, we are lowering our outlook for the full year.
“Despite these near-term headwinds, we're acting on the things that we can control," said Benson. "We're focused on advancing our new franchisee growth model and its strategic priorities and supporting our franchisees, while driving enhanced value for shareholders."
Benson hands over the CEO baton next month, when Coleen Keating takes over to lead the next phase of growth. She brings more than three decades of experience in franchising, brand management, operations and leading customer-facing organisations.
For the full financial year, ending December 31, 2024, Planet Fitness expects to open between 140 and 150 new locations and an increase in same store sales of between 3 and 5 per cent (downgraded from 5 to 6 per cent). It has long term ambitions for 5,000 stores in the US.
Revenue is expected to increase in the 4 to 6 per cent range (downgraded from 6 to 7 per cent).
Adjusted EBITDA is expected to increase in the 7 to 9 per cent range (instead of 10 to 11 per cent) and adjusted net income is expected to increase in the 6 to 8 per cent range (down from 9 to 10 per cent).
The company will continue to focus on giving franchisees additional flexibility to build their portfolios, for example by relaxing the remodel requirements from 10 to 12 years and adjusting the re-equips from five to seven years to six to seven years.
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