Planet Fitness Grows Revenue but Warns of ‘Transition Year’
The popular gym chain continues to grow membership and revenue but is facing executive upheaval and some uncertainty over new business plans
Planet Fitness, inching closer to 20 million members and now with 2,575 store locations, reported that total revenue increased from the prior-year period by 1.4% to $285.1 million in its fourth quarter, and for fiscal 2023, its total revenue increased from the prior year by 14.4% to $1.1 billion.
In addition to its fourth quarter and 2023 earnings, Tom Fitzgerald, chief financial officer, has announced his intention to retire at the end of August.
Providing its 2024 outlook, Planet Fitness expects revenue to increase in the 6%-7% range when compared to 2023, new equipment placement of approximately 120-130 in franchisee-owned locations and system-wide same-store sales in the 5% to 6% percentage range.
Despite the strong numbers, Planet Fitness shares were down 3% on Thursday morning shortly after the earnings announcement.
The fitness franchisor and operator had kicked off a “New Growth Model” last year to support long-term store growth in the face of post-pandemic macroeconomic challenges, which interim CEO Craig Benson noted reduces capital requirements for owning and maintaining a PF franchise location with additional flexibility to build store portfolios.
“While we believe that 2024 will be a transition year as our franchisees incorporate the changes into their growth plans, given our consistent and predictable asset-light model, we believe that we can deliver between 10 and 11 percent adjusted EBITDA growth, enabling us to generate significant cash flow to invest in the business and return capital to shareholders via our share repurchase program,” Benson said
“Importantly, we are expanding our total store opportunity to 5,000 in the U.S. based on the results of our recently completed third-party studies, up from the 4,000 total store opportunity we communicated at the time of our initial public offering in 2015,” he added.
Inside the Numbers
In the fourth quarter, 77 new Planet Fitness stores were opened and the fitness operator reported net income of $36.8 million, compared to $36.3 million in the prior-year period. Franchise segment revenue also increased $12.0 million or 13.9% to $98.2 million from $86.3 million in the prior-year period.
For fiscal year 2023, Planet Fitness reported net income was $147.0 million, compared to $110.5 million in the prior year. The fitness brand opened 165 new stores during the year. As for franchise segment revenue, Planet Fitness reports it increased $58.3 million or 17.7% to $387.9 million from $329.6 million in the prior-year period.
Former CEO Departs Board
Benson has served as interim CEO following the sudden departure of former CEO Chris Rondeau last fall.
Rondeau recently resigned from the company’s board of directors, according to an SEC filing dated February 15. In part, it read that Rondeau didn’t serve on any board committees at the time of his resignation and that the company believes he resigned from the board due to “disagreements” with the company since his separation as CEO — such as the decision to terminate roughly 9% of PF headquarters-based employees this month, Benson’s role in managing Planet Fitness during its search for a permanent CEO and the board’s role in reviewing and approving decisions.
In response, Planet Fitness wrote that it “respectfully disagrees with Mr. Rondeau’s views on these matters” and noted, “The board has momentum behind the search for a new CEO, and the board is encouraged by the progress to date.”
Last month, Planet Fitness launched a media network for advertisers to target its 18.5 million members, many of whom are Gen Z.
This story has been updated as Planet Fitness issued revised guidance regarding its same-store sales numbers.
