Planet Fitness Reports Strong Q2, Charts Next Chapter Under New CEO
New Planet Fitness CEO Colleen Keating says the big box gym giant will pursue Gen Z, test its Black Card pricing, focus on international growth and refine its messaging as it closes in on nearly 20 million members
Planet Fitness, now at the halfway point of a transition year that includes new leadership and updated basic membership pricing, reported Q2 results reflecting a 5.1% revenue increase to $300.9 million (up from $286.5 million) and a $1.2 billion boost in system-wide sales (up from $1.1 billion) when compared to the prior year period.
The “Judgement Free Zone” fitness operator opened 18 new Planet Fitness stores in Q2, consisting of 17 franchisee-owned stores and one corporate-owned, bringing its total store count to 2,617 at the close of June.
Looking ahead for the remainder of 2024, Planet Fitness reaffirmed new equipment plans for approximately 120 to 130 franchisee-owned locations and system-wide new store openings of roughly 140 to 150. The franchisor’s financial outlook follows a similar trend, reiterating its expectations of revenue to increase in the 4% to 6% range and system-wide same store sales in the 3% to 5% range.
“Since I stepped into the CEO role in June, I have become even more confident and excited about my decision to join such an iconic brand, supported by a strong foundation and team, a solid base of approximately 100 franchisees, and approximately 19.7 million members,” Planet Fitness CEO Colleen Keating said, adding that the high-value, low-price (HVLP) franchisor refinanced a portion of its debt and entered a $280 million accelerated share repurchase program in the second quarter.
Keating replaces former CEO Craig Benson, who filled in following Chris Rondeau’s unexpected ousting last September.
On Tuesday’s earnings call with investors, Keating outlined her vision for Planet Fitness, stating that since taking her post in early June, she’s “hit the ground running,” and visited over a dozen clubs across six states plus Spain.
Notably, she believes Planet Fitness can double its domestic footprint to approximately 5,000 locations, surpassing the 4,000 location target it had during its 2015 IPO.
Planet Fitness Breaks Ground in Europe
On the international front, with Planet Fitness opening its first European club in Barcelona, Keating is confident that the franchisor has ample opportunity to make its mark abroad, especially after visiting several other fitness brands operating in Spain.
“We have a highly differentiated offering and tremendous runway to grow to real scale and density in the Spanish market, where today, only roughly 10% of the population belongs to a gym,” she told investors.
Earlier this year, Planet Fitness announced its plans to open 300 locations in Spain and explore other opportunities in the European market — plans that aren’t unique to the big box operator, as Basic-Fit, Europe’s top-performing HVLP gym chain, plots to rebrand over 40 recently acquired McFit clubs in Spain and bolster its footprint. VivaGym, a budget-conscious Iberian gym operator, is also eyeing the burgeoning European fitness market with ambitions to grow to 190 centers following a deal with Providence Equity Partners.
“What we’re not about is flag planting,” Keating affirmed. “What we are about is getting to real scale, identifying markets where we believe we can get to real scale and real density. And that is the case with Spain.”
Emphasizing the “High Value” of HVLP
Brand messaging will also get an overhaul under Keating, which she says will focus on the “high value” aspect of the HVLP model as it looks to attract new members, particularly Gen Z, who make up the majority of PF’s net new joins each quarter. The updated messaging will roll out later this year and continue into Q1 2025.
“We’re seeing Gen Zs as the fastest-growing segment of our member population,” she added.
The decision to zero in on messaging follows Benson’s critique of Planet’s past lackluster advertising campaign that he said contributed to lower net joins in Q1, telling investors in May that the campaign (and its lack of price-pointed offers) didn’t resonate as broadly as Planet Fitness had anticipated.
Although she didn’t reveal any specifics, Keating alluded to in-club elements that will emerge in late Q4 and early Q1 and signal Planet’s modernization and brand evolution, as well as the continued review of low-cost amenities for both classic card members and Black Card holders.
The fitness franchisor is also on the hunt for a chief development officer and chief marketing officer while it continues to search for a chief financial officer to replace CFO Tom Fitzgerald, who will retire at the end of the year.
Black Card Pricing Undergoes Price Tests
Planet’s new Classic card member price increase (now $15 per month for new members, up from its longstanding $10 pricing) took effect June 28 — a move Keating says will positively impact new Planet Fitness gyms in particular. While the price increase took effect right before the end of the second quarter, it has garnered support from analysts who say the price hike bodes well for the big box gym giant and the fitness industry as a whole.
“We expect that after one year of the price being in effect, existing stores will see a low- to mid-single-digit percentage increase to AUVs, with an even greater impact to new stores as the majority of their classic card members will be paying $15,” Keating said.
Now that the new base membership is in effect for new members (current Classic card members maintain a $10 per month “price for life”), Planet Fitness is turning its attention to two Black Card pricing tests (set at $27.99 and $29.99) which are being conducted in select markets and will run possibly into Q4.
Currently, over 60% of members join as Black Card members ($24.99) to access amenities such as massage chairs, HydroMassage beds, tanning and red light therapy booths—a percentage that analysts predict will increase, considering the pricing gap has been narrowed compared to the $15 basic membership price.
Fitzgerald reflected on the relatively soft past January in terms of new member growth, citing lingering “noise” over COVID and seasonal illnesses and the widely-covered locker room incident. Despite the unplanned bumps in the road, he indicated that Planet’s momentum has put the franchisor on a positive growth path for the remainder of 2024 and early next year.
“We were just talking to some of our big franchisees recently. They’re happy with how all that played out and how the team handled it,” Fitzgerald said of the challenges earlier this year. “But those two things really impacted our membership levels compared to where we thought. But I think we have the time now to gear up for the back half of the year, particularly December leading into January and cranking up for what should be a great Q1.”
