Life Time Stock Crashes Amid Premium Fitness Investment Surge

As a user, you might be interested to know that Life Time Group shares fell by a significant 15% on Wednesday. This was following the company’s third quarter results, which showed an increase in spending to enhance the experience for premium members.

Rising Operational Cost and New Investments

During the quarter, the cost of running the company’s fitness centers, including brand new and ramping up locations, rose by 8.2% year over year to $319.4 million. The CEO of Life Time, Bahram Akradi, stated that these investments, such as the introduction of pickleball courts and personal training programs, have played a significant role in driving member engagement. The company has seen a notable 24% increase in average member visits since 2019 across their 170 centers.

Exploring Additional Services for Growth

Akradi also mentioned that the time is ripe for Life Time to consider expansion. He asked, “What other products and services can consumers buy from us?” This is not only a strategic move for growth, but an attempt to keep their affluent customer base satisfied as prices rise universally and consumers show a higher appreciation for premium offerings.

Future Price Increases and Systemizing Programs

Life Time has raised its prices at many locations in recent years, although the pricing varies by market. On Wednesday, Akradi disclosed that while the majority of price changes are complete, there is still an opportunity to increase member prices at about 20%-25% of the clubs over the next six to twelve months.

Akradi emphasized the vital work being done to systematize their various programs, stating that “Any product that we put out there has to be absolutely the best.”

New Offerings and Long-term Investments

The CEO believes their new offerings will prove to be worthwhile, long-term investments that will strengthen the luxury brand. He explained that higher engagement from members will likely translate into higher return visits and increased spending over the lifetime of the relationship.

Life Time’s investment in the “Dynamic Stretch,” an assisted stretching program, could create a $50 million market opportunity in 2024, according to the company. They are also considering adding weight loss drugs to members’ fitness plans, aligning with the trending GLP-1 trend, as stated by Chief Operating Officer Jeff Zwiefel in an interview with CNBC.

Third Quarter Financial Results

For the third quarter, Life Time reported a net income of $7.9 million or 4 cents per share on revenue of $585.2 million. In comparison, during the third quarter of last year, the company earned $24.7 million or 12 cents per share on revenue of $496.4 million.