In a strategic move aimed at bolstering profitability, Planet Fitness is increasing prices for new customers while acknowledging the growing economic pressures facing its consumer base.
Planet Fitness: Classic Card Membership Hike
The classic card membership, which has been priced at $10 per month since 1998, will now cost $15 for new members starting this summer. However, current members will be grandfathered in, retaining their original $10 monthly rate 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,” stated Tom Fitzgerald, the outgoing chief financial officer.
Black Card Membership Adjustments
Planet Fitness will also experiment with higher pricing for its top-tier Black Card membership, which offers premium benefits, including access to any Planet Fitness location and digital content. This move, designed to cater to members seeking more comprehensive fitness options, will set the starting price at $24.99 per month.
Navigating Market Headwinds
The decision to hike prices comes amidst weaker-than-expected first-quarter revenue and a reduced fiscal year outlook. Planet Fitness attributes these results to challenging macroeconomic conditions that have prompted consumers to prioritize savings and heightened concerns over rising COVID-19 infections and other illnesses.
Planet Fitness is hiking its prices for the first time since 1998. Here's what you need to know: pic.twitter.com/aDZt3Nvkdg
— TheStreet (@TheStreet) May 10, 2024
Interim CEO Craig Benson acknowledged that the company’s advertising campaigns hadn’t resonated as broadly as expected, further impacting growth.
“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 explained.
Analyst Optimism Remains High
Despite the challenges, some industry analysts remain optimistic about Planet Fitness’s future. Piper Sandler’s Korinne Wolfmeyer expressed confidence in the brand’s potential, noting that results “were not as weak as feared.”
Piper Sandler maintains a “buy” rating on Planet Fitness stock with an $80 price target. Shares, which currently trade at about $65, saw a 5% increase on Thursday following the earnings announcement.
A significant source of optimism surrounds incoming CEO Colleen Keating, who will assume her role on June 10. Wolfmeyer emphasized, “We see the new CEO’s past experience in brand building and leading consumer-facing companies as being instrumental here.”
Looking Ahead
While Planet Fitness navigates these transitional waters, its strategy remains focused on maintaining its appeal to cost-conscious consumers while expanding value for premium customers.
The company will be closely watched in the coming months to see how these pricing adjustments influence growth, membership trends, and overall profitability.
