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Investors Bullish on Planet Fitness Despite Controversy
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Investors Bullish on Planet Fitness Despite Controversy

Calls to boycott Planet Fitness are muffled by the sound of ‘’buy” ratings as the low-price gym chain continues to win with Gen Z

Planet Fitness may be the latest company to face calls for a boycott but the high-value, low-price (HVLP) gym chain is taking it in stride, as some financial analysts suggest that any controversy pales in comparison to the fitness franchise’s overall positive health.

Shaking off a social media controversy is no small feat, but in the case of a recent locker room incident between a female member and a transgender Planet Fitness member, the fitness operator has reaffirmed its non-discrimination policy and appears focused on its year ahead. 

Stifel analyst Chris O’Cull is maintaining a Buy rating of PLNT shares with an $80 price target, according to TipRanks, commenting that the market was likely overreacting to the situation.

Planet Fitness’ stock price fell a few percentage points in the days after it was made known that the gym chain revoked an Alaska woman’s membership for filming a transgender person in the women’s locker room. Planet Fitness said the woman violated its policy against filming in locker rooms, but the incident sparked outrage and calls to boycott the gym chain among certain corners of the internet.

Although calls for a Planet Fitness boycott appear reminiscent of those of Bud Light, the gym chain presents itself as perfectly fortified, perhaps even untouchable, considering its brand messaging has long made it known that it promotes a judgement-free zone. The fitness operator also weathered a similar incident in 2015.

“Fortunately, social media comments have a short shelf life when it comes to search, whereas news stories last longer, so having positive earned media highlighting the brand’s ‘judgement free’ positioning can prevent search results with a shorter shelf life from continuing to impact the brand’s reputation,” O’Cull told the publication earlier this week.

Indeed, Planet Fitness shares quickly rebounded, with the gym chain’s market cap at $5.5 billion when trading closed on Friday, right around where it was in early March before the controversy.

Planet Fitness ended 2023 with 18.7 million members, an increase of more than 1.7 million from 2022, opened 165 new locations and reported a total revenue increase of more than 14% to more than $1 billion, despite major changes that included the sudden and unexpected departure of former CEO Chris Rondeau.

Planet Fitness is nearing 20 million members but is also facing uncertainty over pricing (credit: Planet Fitness)

Planet Fitness in ‘Transition Year’

Currently being led by interim CEO Craig Benson, Planet Fitness has yet to name its new chief executive, while its CFO, Tom Fitzgerald, is set to retire this summer. The setting spells a transition year for Planet Fitness, notes Max Rakhlenko, a TD Cowen analyst.

Aside from the C-suite changes, a combination of the fitness operator’s pricing pilot and its in-gym shift from cardio to strength also define a transitional year, Rakhlenko points out. 

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“As Planet Fitness looks to capture more Gen Z gym goers, that cohort does have a greater preference for strength as far as their workouts go,” Rakhlenko tells Athletech News. “Especially in the new boxes that they’re opening, this year is really focusing on pivoting more towards strength than cardio. These are some of the bigger things that the company is working on in 2024, so we certainly view it as a transition year, which hopefully sets them up for a better 2025.”

Rakhlenko says it’s important for Planet Fitness to get its pricing pilot right, which could see the gym chain increase its $10-per-month base membership to $15, although he noted that the brand has maintained a $10 entry price point for a considerably long time despite economic changes.

“The cost of building these gyms has significantly increased,” he said. “Ultimately, we do view this pilot as very important for the future of the company.”

A Gym Goliath

As for what Planet Fitness is getting right, Rakhlenko sees the HVLP gym model as a “very attractive part” of the fitness ecosystem. The gym chain is a Gen Z favorite, with many younger consumers being drawn to Planet Fitness’ low monthly price but also its relaxed, no-frills vibe.

“Clearly, Planet Fitness is the 800-pound gorilla in the room,” Rakhlenko said. “They’ve got more gyms than most of their peers combined. They certainly have a very long track record of strong execution and a very good model with still quite strong 4-wall economics — despite a lot of the cost pressures. In general, they are by far the biggest share winner in a very attractive segment of the market.”

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