New membership sign-ups ‘on par’ with last year, Planet Fitness CEO says

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KEY POINTS
  • ″[I’m] really encouraged by what I’m seeing,” Planet Fitness CEO Chris Rondeau said.
  • Despite a “slight cancellation bump” in membership at the beginning of the month, May has been as “normal as a normal May would be” for Planet Fitness, he said in a “Mad Money” interview.
  • “This is just a soft opening. So, the fact that we’re doing this many joins on just a normal May opening, I’m really pleased so far,” he said.
Planet Fitness CEO says gym chain membership is holding up, despite pandemic
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Planet Fitness CEO Chris Rondeau on Thursday delivered an optimistic outlook about the gym chain’s prospects post-pandemic.

″[I’m] really encouraged by what I’m seeing,” he told CNBC’s Jim Cramer in a “Mad Money” interview.

Planet Fitness, a budget gym chain with about 2,000 locations, has begun reopening fitness centers across the country where permitted. The company relaunched about five stores at the beginning of the month, beginning with Georgia and Utah, and has since welcomed gymgoers to about 50 fitness centers, Rondeau said.

Despite a “slight cancellation bump” in membership at the beginning of the month, May has been as “normal as a normal May would be” for Planet Fitness, he explained.

“Acquisition joins, new joins, is on par for last year, so I’m really encouraged, mostly because there’s no marketing out there, either,” he explained. “This is just a soft opening. So, the fact that we’re doing this many joins on just a normal May opening, I’m really pleased so far.”

Rondeau did not offer any data about membership, nor did he give a timeline for store reopenings.

Wedbush analysts in a note echoed Rondeau’s optimism about churn rate. The firm said early data was “positive,” though it expects the reopening to be lengthy, pending how fast states lift stay-at-home mandates. All of the company’s gyms were shutdown by March 22 and froze dues, which could have helped to minimize cancellations.

Wedbush expects 35% of Planet Fitness locations to reopen in the near-term.

Like other businesses deemed nonessential, Planet Fitness shut down its gyms in March as state governments ordered residents to stay home in efforts to slow the spread of a novel coronavirus. More than 1.4 million people in the United States have tested positive for Covid-19, the respiratory disease caused by the virus.

Planet Fitness has about 130 franchisees. The strong franchise system gives the company a competitive edge, Rondeau said. The average franchisee owns as many as 20 stores that are spread out across three states, which provides diversification, he added.

Cramer suggested that Planet Fitness, which charges members monthly subscription fees as low as $10, could be the only man standing after the pandemic lets up.

“I truly believe that this will create a huge competitive advantage for us. Bigger than we even had before,” Rondeau responded. “We’re going to come out of this and the competitive mode will be wider and I think we’ll probably be where we would’ve been [in] five years I think, probably, 12 months we’ll be in a much better spot.”

Planet Fitness stock lost almost 69% of its value between February and March as the began to take its toll on the country. Shares have since come back roaring 85% from its March 18 close of $27.54. The stock finished Thursday’s session at $51.01.

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