Plant Fitness...The Clear Winner Among Fitness Gyms
Planet Fitness Inc is a franchisor and operator of fitness centers in the United States. It has approximately nine million members and more than 2000 stores in 47 states, the District of Columbia, Puerto Rico, Canada and the Dominican Republic.
Over the years Planet Fitness has been growing like wildfire. I'm not only a client, but one who follows its stock price. Plant Fitness was founded back in 1992 and didn't sell it's first franchise until 2003. In 2006, the company opened its 100th store and had 500,000 members. In six short years, the company had 500 stores. In 2014, the company opened its first international store in Canada. Membership at this point exceeded 1.5 million. Planet Fitness debuted on the Stock Market in 2015 with membership now exceeded 10 million.
2015 was the same year I became a black card member to take advantage of the massage chair and the water bed massager. And for $26 a month, opened 24 hours a day in order to maintain my girlish figure, there was nobody on the market that could beat that. I said to myself, here we go, another fitness play trying to cash in. Little did I know, they weren’t trying to cash in, but use the cash from the Markets to expand their empire. Planet Fitness wants to have 4,000 gyms in the US when it’s all said and done. In hindsight going to the public markets for cash actually worked to their benefit in the last several months.
National gym chain 24 Hour Fitness filed for bankruptcy, after the Covid-19 pandemic forced its facilities to shutdown for months. Yeah, they secured $250 million in funding, but permanently closed 100 US locations in 14 states with roughly 300 clubs remaining.
Gold's Gym, a similar chain to 24 Hour Fitness, filed for bankruptcy in May. Gold's permanently closed 30 locations in April.
New York Sports Club and number of other gyms predominantly on the East Coast is considering bankruptcy because of the temporary closures as well.
Town Sports International (CLUB) has not filed bankruptcy, but had to lay off 7,000 people workforce and stopped paying rent. Town Sports International owns around 200 gyms, including Sports Club branded locations in Boston, Philadelphia and Washington, DC, and also Lucille Roberts, a women's-only gym in New York.
Analyst Jonathan Komp reiterated an Outperform rating on both Peloton Interactive (ticker: PTON) and Planet Fitness (PLNT) on Friday, with target prices of $52 and $82, respectively. His confidence in Planet Fitness is bolstered by recent foot traffic to a number of gym chains, including Blink, Crunch, Gold's, LA Fitness and others, representing about 30% of the U.S. gym industry: The data show that national traffic for the group has improved, to a 61% year-over-year decline for the week ended June 13, up from a 96% tumble in April. Indeed, in states that reopened early, that figure is just a 32% drop.
Of course, it’s easy to see how this could benefit Planet Fitness (although its gyms weren’t tracked in the foot traffic data set Komp analyzed). The trends show that consumers are willing to return to gyms and that “usage is steadily recovering, particularly in early reopening states; returning toward normal usage should maintain healthy membership and support franchisee confidence,” he writes.
Plant Fitness accounted for over 100% of the industries net member growth in 2018. Plant Fitness added about 1.8 million net new members and the industry grew by about 1.6 million. 85% of their monthly dues and annual fees are collected through automatic payments.
When the dust settles and society has defeated COVID-19, there will be winners and there will be losers. Hopefully this post explained who those losers and one winner will be in the fitness gym sector. Regarding Plant Fitness, price bounced off of the weekly demand this week and the chart suggests price can move higher to the $72 level.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
Posted Using LeoFinance