What to Watch When Planet Fitness Reports — The Motley Fool

Since its initial public offering in 2015, Planet Fitness (NYSE:PLNT) has rewarded shareholders with 45 quarters of consistent growth. With nearly 12 million subscription-based members and more than 1,500 locations, Planet Fitness expects to grow revenue 20% and adjusted earnings 40% in 2018. The company reported strong first quarter results in May, growing revenue 33.2% and adjusted earnings per share 42%. 

Will this fitness powerhouse continue to impress when it releases its second quarter earnings this week? 

Planet Fitness brand cardio equipment

IMAGE SOURCE: PLANET FITNESS

A growing footprint

Continuous membership and location growth are essential to Planet Fitness’ ongoing success. The company plans to build 190 to 200 stores in 2018, each will help grow total membership, as the average Planet Fitness store serves about 7,500 members, with high performing locations reaching more than 10,000 people.

Planet Fitness grew its membership by 1.7 million members in 2017, a 19% year-over-year increase, and the company added another 1.2 million members in the first quarter of 2018 alone. New Years’ resolutioners drive a lot of gym memberships, and it will be interesting to see how Planet Fitness’ spring and early summer promotions played out in swimsuit season.

Same-store sales and Black Card upgrades

Planet Fitness offers two tiers of service: a basic membership at $10/month, and Black Card membership for $21.99/month. The upgrade is popular — 59.9% of members chose the Black Card in 2017, and there’s still room for growth through upselling. The company expects same-store sales growth in the high single digits in 2018, and beat its own estimate with 11.1% year-over-year same-store sales in the first quarter (when interest in gyms is the highest).

Growing revenue and net income

Planet Fitness revenues are comprised of franchise royalties and fees, corporate-owned store revenue, the national advertising fund (a pass-through spent on branding and promotions), and equipment sales. In the first quarter, Planet Fitness reported revenue of $121.3 million; analysts expect a 7.6% increase to $130.6 million in the second quarter. Analysts are predicting that earnings per share will increase 40% year over year in Q2 to $0.31 per share.

Technology updates

During the conference call, expect an update on progress in technology and data. In addition to using data to plan for new store locations, Planet Fitness is moving toward a more tech-driven customer experience. In the Q1 conference call, Planet Fitness CEO Chris Rondeau said:

We are exploring new ways to deliver a more personalized and connected fitness journey to our members via our equipment and enhanced mobile app.

In this era of connected fitness, Planet Fitness plans to use technology to further engage members. The company is also working with equipment suppliers to bring more tech directly onto the gym floor. These efforts should provide a better member experience, leading to better retention and lower churn — something that will make investors happy too. 

 

  

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