Planet Fitness Inc (PLNT) Shares Get A Workout Following Company’s Debut Earnings Report

Nonetheless, it’s important to discuss the things going against Planet Fitness Inc (NYSE:PLNT) in light of the positive first earnings report of the company. First off, the gym and health club industry is crowded and very competitive. According to The Street, which cites data from the International Health, Racquet & Sportsclub Association, there were 34,460 health clubs in the U.S. as of August. In 2014, the number of health clubs grew by 6.4%, the association notes, while membership only grew by 2.3%. In short, companies are building more facilities than they are growing their membership base. While Planet Fitness has over 7.1 million members paying $10 per month and it hopes to increase the number of facilities it operates to over 4,000 in the long term, we can see from the figures discussed earlier in this report that over 40% of the company’s revenues are generated from one-time equipment sales. This means that the firm is significantly dependent on opening new locations and getting existing locations to regularly replace equipment.

That said, Planet Fitness Inc (NYSE:PLNT) does have its advantages as well. For one, its brand is clearly defined. Apart from the recognizable purple and yellow branding, its catchphrases such as “No Gymtimidation” and “Judgment Free Zone” are very identifiable, attractive to consumers, and differentiating from other gym operators. Its famous $10 membership fee, while low, is targeted to the occasional gym user, which is about 80% of the target market of the industry. The firm is also encouraging members to migrate to a higher $19.99 membership with its PF Black Card, which will could help the company’s top and bottom lines depending on its success.

Disclosure: None