Planet Fitness Celebrates New Stores and Rising Revenues in Early 2022
Its seventh New Year’s Eve sponsorship in Times Square, its first Superbowl commercial and the mega-acquisition of a Southern super franchise is perhaps the best medicine Planet Fitness can muster after an Omicron attack in January.
Still, there’s a lot of talk about 2022, when officials at the Hampton-based company were discussing the financial situation of the past year. It shows how quickly things are changing when it comes to the fitness industry in the time of Covid.
But before moving on, let’s go back a bit. If you recall, Planet Fitness closed all of its stores at the start of the pandemic, and although they started opening them about two months later, 2020 hasn’t been a good year, according to company financial filings. last week. Net income fell from $689 million to $406 million, and while it rebounded in 2021 to $587 million, it still represents a $100 million drop from pre-pandemic levels . Other economic indicators paint the same picture. The company lost $15.2 million in 2020, then gained $46.1 million last year. That sounds good, unless you compare it to its $135.4 million profit in 2019.
Likewise, store growth slowed from 261 new stores in 2019 to about half that level in the following two years. This led to a sharp drop in sales of the company’s equipment to franchise stores. While franchise and corporate store revenues recovered from the pandemic, equipment sales were half of what they were.
The company had a strong fourth quarter, with revenue up 37.3% to $183.6 million, and system-wide stores up 12.3%, bringing the total number of stores at 2,254.
There was “softness” in January, CEO Chris Rondeau said on an earnings call, but members started coming back at the end of the month, so the company ended up having a net membership growth of 400,000, four times what it was in January 2021. .
Yet Planet Fitness officials don’t want investors, or anyone for that matter, to forget that no gyms have been closed in the past two years, at a time when a quarter of other clubs were failing. The company used its large advertising clout — franchises must pay 2% of the company’s national ad campaign and 7% dues on local advertising — its fitness app and cash reserves to ride out the storm. Plus, he has the economic clout to buy out those closing gyms, or at least tackle their membership.
In its earnings calls after the company’s release — which preceded the March 1 filing by a week — Rondeau pointed to promising signs for the future. For one thing, some 62% of members now pay over $20 for a black card subscription that gets them all sorts of in-app perks as well as membership privileges (including the ability to to bring a friend) to all of his gyms. That’s pretty good, considering membership only costs $10 a month.
“The fact that people are coming in and out paying more than double is just an incredible pattern,” Rondeau said on the call, transcribed by Motely Fool.
Rondeau was also keen to highlight the progress the company has made in attracting younger audiences. The company now claims 8% of all millennials and Gen Z, which in the latter case is remarkable because “only half of this generation is old enough to join our gym”.
Whether a Superbowl ad featuring Lindsay Lohan, William Shatner, Dennis Rodman and Jeopardy is the best way to reach that audience is an open question, but in addition to investing in high profile advertising, the company invests in itself, in a way. In February, it spent $800 million – $425 million in cash – to buy 114 stores from Sunshine Fitness, one of its most successful franchises. This nearly doubled the number of company-owned stores, bringing it to 10% of franchise stores.
That’s quite an expense for a company with only $546 million in cash at the end of the year. The company had over $2 billion in assets, but it also had $2.5 billion in non-current liabilities. Planet Fitness has always been a business that relies on growing cash to meet debt, and it has always grown, even – to a lesser extent – during a global pandemic.