Transition Year Ahead: Planet Fitness Boosts Revenue Growth

Planet Fitness: Sustaining Membership Growth Amidst Executive Changes and Business Uncertainties

As one of the leading fitness chains in the nation, Planet Fitness is on the verge of reaching 20 million memberships, boasting 2,575 outlets across various locations. During its fourth quarter, the company saw a 1.4% rise in total revenue from the previous year, reaching $285.1 million, whereas for fiscal 2023, the total revenue surged by 14.4% to $1.1 billion from the prior year.

The CFO, Tom Fitzgerald, has voiced his plans to retire by August-end, following the announcement of the fourth quarter and 2023 earnings.

Planet Fitness’ Prospects for 2024

Going into 2024, Planet Fitness anticipates a revenue growth of around 6%-7% compared to 2023, with new equipment placement expected at 120-130 franchise-owned locations. System-wide same-store sales are projected to be in the high single-digit percentage range.

Although the company showed strong financial performance, Planet Fitness’ shares dipped by 3% following the earnings announcement.

The New Growth Model: A Countermeasure to Post-Pandemic Challenges

With the goal of encouraging long-term store growth amidst post-pandemic economic issues, Planet Fitness initiated a “New Growth Model” last year. This strategy, as explained by interim CEO Craig Benson, offers franchise owners the advantages of reduced capital requirements and greater flexibility in expanding their store portfolios.

Despite anticipating 2024 as a transitional year, the company is optimistic about achieving an adjusted EBITDA growth between 10 and 11 percent. This is expected to generate considerable cash flow for business investments and shareholder returns through the company’s share buyback program.

As an additional growth prospect, Planet Fitness aims to expand its total store count in the U.S. to 5,000, based on the findings from recent third-party surveys. This is a significant increase from the 4,000 total store target communicated during the time of their initial public offering in 2015.

An Insight into the Financials

In Q4, Planet Fitness opened 77 new stores and reported a net income of $36.8 million, slightly up from $36.3 million in the prior-year period. The franchise segment revenue also hiked by 13.9% to $98.2 million from $86.3 million during the same period.

For the fiscal year 2023, the net income reported was $147.0 million, a leap from the previous year’s $110.5 million. The fitness brand added 165 new stores during this year. The annual franchise segment revenue saw an increase of 17.7% to $387.9 million from $329.6 million of the previous year.

The Departure of Former CEO and Board Member

Following the unexpected exit of former CEO Chris Rondeau last fall, Benson has been serving as the interim CEO. Rondeau, who recently resigned from the company’s board of directors, reportedly had disagreements with the company since his separation as CEO.

In response to these matters, Planet Fitness stated that it “respectfully disagrees with Mr. Rondeau’s views” and remains confident in its ongoing search for a new CEO.

Most recently, Planet Fitness introduced a media network for advertisers to reach out to its 18.5 million members, a significant portion of which are Gen Z.