Planet Fitness reported strong third-quarter (Q3) performance that it attributes to growing membership among Generation Z consumers.
“We continue to see our strongest net member growth for Gen Zs who now make up a quarter of our membership base,” Planet Fitness Interim CEO Craig Benson told analysts on a Tuesday (Nov. 7) earnings call. “We believe we are unique among most multiunit brands and that the average age of our members continues to decrease.”
The teen membership rate received an additional boost through the success of the High School Summer Pass Program, which allows teens to work out at Planet Fitness gyms for free during summer. According to the company, this year saw 3 million-plus teenagers and 2 million parents and guardians enrolled in the annual program, introducing its brand to a fresh wave of potential clients.
Overall, the company ended the quarter with more than 18.5 million members. Notably, nearly 110,000 net new members were added in Q3, surpassing the net growth achieved during the same period in the previous year as well as in 2019. Additionally, systemwide same store sales increased 8.4% and 26 new Planet Fitness stores opened in Q3, bringing the global store count to nearly 2,500.
To address rising costs, the firm is making changes to its growth model. This includes extending franchise agreements from 10 years to 12 years, adjusting the timing for equipment replacements based on usage, and reducing the investment required to build a new store by 5% to 10%.
Additionally, the company is exploring the possibility of raising the price of its unlimited Classic Card Membership — it has remained at $10 for 30 years — in response to inflationary pressures.
Subsequently, the company has initiated pricing tests in approximately 100 stores across different designated market areas (DMAs), where the cost for basic Classic membership is $15 during non-sale periods and $10 during sale promotions.
Management further emphasized their commitment to ensuring that the potential price adjustment does not impede member growth, which they consider the “sustainable lifeblood” of their business.
“We are trying to get people off the couch, and cost is a barrier to getting off the couch [so] we just want to be very careful […],” Planet Fitness CFO Thomas Fitzgerald emphasized, recognizing the critical role of affordability in promoting fitness. “We’ve got to scientifically figure out what’s better than what we have and if we find [a pricing strategy that works] we will move to it.”
Despite the challenges posed by rising costs, company executives expressed optimism about its membership and growth trends, adding that the company will focus on maintaining a strong member experience and improving store returns moving forward.
Finally, Benson said the board is proceeding “with urgency, but not hastily” in the quest for a new CEO. This move was prompted by a September decision by the board to transition to new leadership, which resulted in Chris Rondeau’s departure as the company’s CEO.
In terms of desired qualifications, international experience, consumer branding and consumer marketing experience were highlighted as significant to the role. “Obviously, public company experience is important to us as well,” Benson added.
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