Planet Fitness' stock rallies after company unveils first price hike in 30 years

By Ciara Linnane

The gym chain will raise the monthly price of its classic pass to $15 from $10 starting this summer

Planet Fitness Inc.'s stock reversed early losses to gain 8% on Thursday, as investors looked past a revenue shortfall and lowered guidance to focus on a price hike and other positives from its earnings call.

Hampton, N.H.-based Planet Fitness (PLNT) had net income of $34.3 million, or 39 cents a share, for the quarter, after income of $22.7 million, or 27 cents a share, in the year-earlier period.

Excluding one-time items, EPS came to 53 cents, ahead of the 50-cent FactSet analyst consensus.

Revenue rose 11.6% to $248 million, while FactSet analysts were expecting $249 million.

Interim Chief Executive Craig Benson said the company faced several headwinds during the quarter, including a shift in consumer focus to savings and concerns about a spike in COVID-19 infections and other illnesses that kept some out of gyms.

But he also cited an 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," he said in prepared remarks.

On a call with analysts, Benson said the company did not include price-point offers as part of the ad campaign, as it was conducting pricing tests in several markets to inform its strategy.

That decision "may have created less urgency for consumers to get off the couch and join," he said, according to a FactSet transcript of the call.

Planet Fitness started testing two price points for its classic card last fall, at $15 and at $12.99, in about 100 stores each, Benson noted. Both were lowered to $10 during national sale periods with the message to sign up quickly and not miss out on the discount.

The company has now decided to change the price of the card to $15, which will be effective this summer for new members, he said. The price had held steady at $10 since 1998, according to Benson.

Separately, an incident at an Alaska gym that related to the company's antidiscrimination policy attracted negative social-media commentary that crimped membership, he said.

"Once social media sort of blew up ... over our policy issue, we definitely saw a change in the results in the back half of March. Joins and cancels were, you know, fairly significantly affected," said Benson.

Planet Fitness ended the quarter with about 19.6 million members and same-store sales growth of 6.2%. It opened 25 new facilities in the period, including 23 franchisee-owned locations and two corporate-owned ones. That expanded its overall network to 2,599 locations as of March 31.

In 2024, the company is still expecting to open around 140 to 150 new locations.

Planet Fitness is now expecting revenue to rise 4% to 6% in 2024, down from its previous guidance for growth of 6% to 7%. It forecast adjusted EPS to rise by 7% to 9%, versus prior guidance for a rise of 10% to 11%, and for same-store sales to rise 3% to 6%, down from previous guidance of 5% to 6%.

The stock has fallen 15.3% in the year to date, while the S&P 500 has gained 8.8%.

-Ciara Linnane

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

05-09-24 1407ET

Copyright (c) 2024 Dow Jones & Company, Inc.