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Aug. 10, 2022, 8:17 a.m. EDT

Planet Fitness can ‘thrive’ during high inflation and a recession, but stock drops as revenue misses

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By Tomi Kilgore

Planet Fitness Inc. Chief Executive Chris Rondeau said Tuesday that he believes the lower-priced fitness center franchisor and operator can “thrive” in a high-inflation environment, or even a recession, as people from higher-priced gyms trade down.

Rondeau said that trends in the fitness business are “positive,” with usage nearly back to where it was in pre-pandemic 2019.

That said, Planet Fitness’s stock /zigman2/quotes/203234487/composite PLNT -0.08% dove 7.4% in afternoon trading, after the company reported second-quarter profit that matched expectations but revenue that missed, even as same-store sales rose more than forecast.

In a post-earnings conference call with analysts, Rondeau said that given the current inflationary period, he believes the company’s more “affordable” fitness experience “will resonate now more than ever” as Americans seek value while feeling the rising costs of everyday items.

“We also believe that people [will continue] to prioritize their health and wellness while being more cost conscious, even trading down to Planet from high-price gyms, if they’re not using the basketball court, pool, daycare, etc.,” Rondeau said, according to a FactSet transcript.

He said the company is adding new members and new stores, and usage of Planet’s gyms is back above the 90% index of 2019, with people who are working out doing so more frequently. And with younger generations prioritizing fitness, the average age of its members is falling.

All this at a time of lingering COVID-19 impacts to the broader economy, and the current climate of inflation and a concerns of a coming recession.

“We are confident, based on past performance, that we can not only survive, but thrive, in a high-inflation or possibly recessionary environment,” Rondeau said.

Earlier Tuesday, the company reported second-quarter net income that rose to $22.3 million, or 26 cents a share, from $14.0 million, or 17 cents a share, in the same period a year ago. Excluding nonrecurring items, adjusted earnings per share of 38 cents matched the FactSet consensus.

Revenue grew 63.5% to $224.4 million, but was below the FactSet consensus of $230.1 million, while same-store sales growth of 13.6% beat expectations of an 11.0% rise.

The company said membership was now only 6% below pre-COVID levels, and 330 new locations have been added since the beginning of 2020.

Looking ahead, the company reiterated its 2022 guidance ranges for same-store sales growth in the low double-digit percentages and for revenue to rise in the mid-50s percentage range. Adjusted EPS is still expected to increase in the mid-80s percentage range, while the current FactSet EPS consensus of $1.55 implies 89% growth.

Planet Fitness shares have rallied 8.8% over the past three months but have dropped 17.1% year to date, while the S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.20% has tacked on 3.3% the past three months and declined 13.5% this year.

/zigman2/quotes/203234487/composite
US : U.S.: NYSE
$ 62.06
-0.05 -0.08%
Volume: 946,829
Oct. 5, 2022 4:00p
P/E Ratio
84.68
Dividend Yield
N/A
Market Cap
$5.61 billion
Rev. per Employee
$489,871
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/zigman2/quotes/210599714/realtime
US : S&P US
3,783.28
-7.65 -0.20%
Volume: 2.22B
Oct. 5, 2022 5:03p
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