Planet Fitness stock near record high, real estate ‘gains’ without ‘retail pains’

Planet Fitness

Bernard Weil | Toronto Star | Getty Images

Shares of Planet Fitness are up more than 7 percent midday Thursday after the company beat top- and bottom-line second-quarter expectations.

In a call with investors, executives of the low-cost gym chain pointed to its appeal to casual exercisers and ability to snap up vacant swaths of retail real estate. Planet Fitness’ stock traded as high as $25.01, on pace to surpass its all-time closing high of $24.54 set Nov. 11, 2016, according to FactSet.

“There are not a lot of retailers out there taking down 20,000-square-foot boxes [of real estate] a year,” the company’s chief financial officer, Dorvin Lively, said. “One of the benefits we get is we’re one of the first ones to get called now, when something becomes available.”

Cowen Group analyst Oliver Chen emphasized that Planet Fitness is utilizing real estate deals, writing that the company’s “gains not impacted by retail’s pains.” Chen pointed to the Planet Fitness business model as one “not built on the extras,” saying it has the most potential so long as the company stays true to its “DNA of a nonjudgmental exercise environment.”

“The company’s ‘judgment-free’ culture creates a low risk opportunity for new entrants into the fitness market, and has led to some of the highest market share growth in the fitness category,” Chen said.

Planet Fitness CEO Christopher Rondeau emphasized that a combination of the company’s simple model, available real estate and casual appeal allowed it to scale quickly.

“We’ve doubled the number of stores over the past four years to over 1,400 locations,” Rondeau said.

He also cited up to 40 percent of recent new members who told the company they never went to a gym before joining Planet Fitness. He says the advantage of Planet Fitness is how it caters “to the 80 percent of the population that doesn’t have a gym membership.”

Planet Fitness reported second-quarter adjusted earnings per share of 22 cents, above Wall Street expectations for 19 cents, according to analysts polled by Thomson Reuters. Revenue totaled $107.3 million, also surpassing estimates for $102 million in revenue. In the year-earlier quarter, the company posted adjusted net income of 17 cents per share and revenue of $91.5 million.

Programming note: For more on Planet Fitness, watch CEO Chris Rondeau’s interview on “Mad Money” Thursday night at 6 p.m. ET.

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