Planet Fitness, the popular gym operator, has announced that it will be increasing its base-level membership prices for new customers for the first time since 1998. This decision comes as the company acknowledges that customers are becoming more cost-conscious. The new price for the Classic card membership will be $15 per month for new members starting this summer. However, current members will continue to pay $10 per month for the duration of their membership.
According to Tom Fitzgerald, the outgoing chief financial officer of Planet Fitness, it will take some time for the price change to expand the store-level margins as the increase will only affect new classic card memberships. The company has been conducting price testing in various markets nationwide before making this decision. Additionally, Planet Fitness plans to test higher prices for its top-tier membership, known as the Black Card, later this summer. The Black Card membership offers customers access to any Planet Fitness location, digital content, and other benefits for a starting price of $24.99 per month.
The move to raise prices comes after Planet Fitness reported weaker-than-expected first-quarter revenue and lowered its guidance for the fiscal year. In contrast, competitor Life Time Holdings posted better-than-expected results and saw strong membership growth in its most recent quarter. One key difference between the two gym operators is the customer demographic they attract. Life Time members tend to be older and more affluent, while Planet Fitness appeals to a younger, more budget-conscious consumer.
In their earnings release, interim CEO Craig Benson acknowledged that several macro conditions have contributed to an increasingly cost-conscious consumer. The shift in consumer focus towards saving money at the start of the year, coupled with concerns over the increase in Covid infections and other illnesses, has impacted Planet Fitness’ results. Furthermore, the company’s national advertising campaign did not resonate with consumers as widely as expected.
Despite these challenges, analysts still see positive potential for Planet Fitness. Piper Sandler analyst Korinne Wolfmeyer stated that the results were not as weak as feared and highlighted two key changes that could benefit the company: the appointment of a new CEO and the introduction of White Card pricing. Piper Sandler maintains a “buy” rating on Planet Fitness stock and has set an $80 price target. Currently, shares of the company are trading at around $68 per share, having gained about 9% on Thursday.
Investors and analysts are optimistic about the company’s future under incoming CEO Colleen Keating, who will assume the role on June 10. Keating’s past experience in brand building and leading consumer-facing companies is seen as instrumental in turning the company around.
In conclusion, Planet Fitness is increasing its membership prices for new customers for the first time in over two decades. The decision comes as the gym operator faces challenges due to a shift in consumer focus towards saving money and concerns over Covid infections. Despite these obstacles, analysts believe that positive changes, such as the appointment of a new CEO and revised pricing, could lead to a turnaround for the company. Investors remain hopeful about Planet Fitness’ future prospects.
