The big box gym giant reported lackluster numbers for Q1 and lowered its full-year outlook but the pricing announcement caused PLN shares to rise

Planet Fitness reported lackluster new member numbers and is lowering its outlook for the full year, citing several headwinds, such as reduced consumer spending, illnesses and a national advertising campaign that the fitness franchise says missed its mark. Still, the company has satisfied investors by raising its base-level membership price, causing shares of PLNT to rise over 5% on Thursday, rallying from an early-morning slump.

After running numerous pricing tests, Planet Fitness announced it will increase its Classic Card membership cost to $15 (up from its long-standing $10/month price point.)

The pricing change goes into effect this summer for new members, while current Classic Card holders will continue to pay $10 a month for the duration of their membership – this concept, “price for life” — is one that Planet Fitness says it will begin to heavily highlight as part of its strategy. Over 60% of Planet Fitness members join as Black Card members ($25/month), according to the gym brand.

Planet Fitness added nearly one million new members in the first quarter of 2024, but that number was less than the fitness franchise expected.

“The increase of approximately 900,000 net new members in the first quarter was below our expectations for what has historically been our highest net growth quarter pre-pandemic,” said interim CEO Craig Benson. He added that the lack of a price point in the fitness brand’s January sales ads may have created “less urgency” for consumers to join.

The results follow a report issued earlier this year that indicated traffic to leading fitness operators, such as Planet Fitness, was off to a sluggish start. 

Transgender Controversy Has Impact

Planet Fitness chief financial officer Tom Fitzgerald acknowledged that recent social media controversy over the gym brand’s transgender bathroom policy likely had an impact on membership numbers.

“The first part of March was pretty good,” Fitzgerald said. “Joins and cancels were pretty good. And then 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 fairly significantly affected.”

Fitzgerald added that while joins have since rebounded, cancellations have remained elevated. 

credit: Planet Fitness

European Expansion Plans

Despite the headwinds, Benson assured investors that the fitness franchise is controlling its controllables. In Q1 2024, total revenue increased from the prior-year period by 11.6% to $248.0 million and 25 new Planet Fitness stores were opened system-wide, bringing PF stores to just shy of 2,600.

“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 said.

The fitness operator ended Q1 2024 with approximately 19.6 million members and system-wide same-store sales growth of 6.2%, which Planet Fitness says was primarily driven by new member growth. 

As for its revised 2024 outlook, Planet Fitness expects system-wide same-store sales in the 3% to 5% percentage range, a drop from its previously expected 5% to 6%.

On its international strategy — Planet Fitness plans to open 300 locations in Spain, the first of which is expected to open in Q3 — the fitness franchise will use the experience to look at other European markets. 

Gym Environment as a Competitive Advantage

When pressed on the competition that the rapidly growing Crunch Fitness and other low-price, high-value (HVLP) fitness franchises bring, Benson was quick to point out what he says is a key differentiator for Planet Fitness.

“I’d say what they all don’t do is provide a non-intimidating environment,” he said. “We still think that’s the thing that sets us apart from the rest.”

“Some use the words. But if you go in there, it’s kind of loud because people are banging weights and grunting and doing all kinds of things that, if you’ve never been in a gym, is going to intimidate you. So we still think that’s an important part of what we do that others don’t do.”

Planet Fitness welcomes Colleen Keating as its new CEO on June 10.

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