For the first time since 1998, Planet Fitness has raised the cost of its entry-level membership for new members, the gym chain said, even as it cautions that its clientele is becoming more frugal.
Beginning this summer, new members will pay $15 per month for a classic card membership. Planet Fitness announced along with its quarterly financial report on Thursday that current members will continue to pay $10 per month “for the duration of their membership”.
“It will take some time for the benefit of the price change to expand our store level margins as the price increase will only be on new classic card membership,” Tom Fitzgerald, the company’s outgoing chief financial officer stated.
After months of evaluating prices across multiple national markets, the change was made. Additionally, Planet Fitness announced that this summer, it will begin testing increasing costs for its Black Card membership, which is its top tier.
For a beginning monthly fee of $24.99, that membership gives users access to all Planet Fitness locations as well as digital material and other perks.
In contrast to rival Life Time Holdings, which reported better-than-expected profits and solid membership growth for its most recent quarter, the company reported weaker-than-expected first-quarter sales and decreased forecasts for the fiscal year. This led to the decision to hike rates.
While Planet Fitness targets a younger, more cost-conscious customer base, Life Time members are typically older, wealthier gym goers.
Craig Benson, the interim CEO of the company, stated in the earnings announcement that a number of macroeconomic factors affected consumers who were becoming more cost-conscious.
“We faced several headwinds which impacted our results including a shift in consumer focus in the New Year to savings and concern over the increase in Covid infections and other illnesses,” Benson stated.
Additionally, he added that the company’s nationwide advertising effort did not have the expected impact on consumers. Analysts continue to anticipate favorable catalysts for the company despite the warning.
“Despite lowered guidance, results today were not as weak as feared,” Piper Sandler analyst Korinne Wolfmeyer stated. “And we’ve now seen two key changes occur that have been needed to recharge shares, including a new CEO and White Card pricing.”
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Piper Sandler continues to have a $80 price target and a “buy” recommendation on Planet Fitness stock. The price of a share is currently about $65, up over 5% from Thursday.
The Street is certain that Colleen Keating, the new CEO of Planet Fitness, who takes over on June 10, can bring about a business turnaround.
“We see the new CEO’s past experience in brand building and leading consumer-facing companies as being instrumental here,” Wolfmeyer stated.
