People exercise at Planet Fitness in Alexandria, Virginia on January 8, 2024.
Leah Millis | Reuters
Planet Fitness said it is raising its basic membership prices for new customers for the first time since 1998, even as the gym operator warns customers are becoming increasingly cost-conscious.
Starting this summer, membership with the Classic card will cost $15 per month for new members. Current members will continue to pay $10 per month “for the duration of their membership,” Planet Fitness said Thursday alongside its quarterly earnings report.
“It will take some time for our store-level margins to increase as a result of the price change, as the price increase only applies to the new classic card membership,” said Tom Fitzgerald, the company’s outgoing chief financial officer.
The change comes after months of price testing in multiple markets across the country. Planet Fitness also announced that it will begin testing higher prices for its top membership, called the Black Card, starting this summer. This membership gives customers access to any Planet Fitness location, as well as digital content and other benefits, starting at $24.99 per month.
The decision to increase prices came after the company reported weaker-than-expected sales in the first quarter and, unlike its competitor, lowered its forecast for the fiscal year Life Time Holdingswhich reported better-than-expected results and strong membership growth in its most recent quarter.
Life Time members tend to be older, wealthier gym-goers, while Planet Fitness appeals to a younger, more budget-conscious consumer.
In the company’s earnings release, interim CEO Craig Benson said several macroeconomic conditions were weighing on an increasingly cost-conscious consumer.
“We faced several headwinds that impacted our results, including a shift in consumer focus in the new year to savings and concerns about increases in Covid infections and other illnesses,” Benson said.
He also said the company’s national advertising campaign hasn’t resonated with consumers as much as expected.
Despite the warning, analysts continue to see positive momentum for the company.
“Despite the lowered forecast, results today were not as weak as feared,” said Korinne Wolfmeyer, an analyst at Piper Sandler. “And we have now seen two key changes that were needed to supercharge the shares, including a new CEO and white card pricing.”
Piper Sandler maintains a Buy rating on Planet Fitness stock and an $80 price target. Shares are currently trading at about $68 apiece, after gaining about 9% on Thursday.
The Street is bullish on a company turnaround with new Planet Fitness CEO Colleen Keating taking on the role on June 10.
“We see the new CEO’s previous experience in brand building and leading consumer-oriented companies as a decisive factor,” said Wolfmeyer.
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2024-05-09 18:37:59
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