People exercise at Planet Fitness in Alexandria, Virginia, on January 8, 2024.
Leah Millis | Reuters
Planet Fitness said it is raising base membership prices for fresh customers for the first time since 1998, even as the gym operator warns that customers are becoming more cost-conscious.
Classic Card membership will cost $15 per month for fresh members starting this summer. Current members will continue to pay $10 a month “for the duration of their membership,” Planet Fitness said Thursday along with its quarterly earnings report.
“Margin increases at the store level will take some time before the pricing changes are beneficial because the price increases will only apply to fresh classic card memberships,” said Tom Fitzgerald, the company’s outgoing chief financial officer.
The change comes after months of price testing in several markets across the country. Planet Fitness also said it will begin testing higher prices this summer for its top-tier membership, known as the Black Card. This membership gives customers access to any Planet Fitness location, as well as digital content and other benefits, for a starting price of $24.99 per month.
The decision to escalate prices came after the company reported weaker-than-expected first-quarter revenue and lowered its fiscal year guidance, unlike its competitors Holdings for lifewhich reported better-than-expected results and significant membership growth in the last quarter.
Life Time members tend to be older, more affluent gym-goers, while Planet Fitness targets younger, more budget-conscious consumers.
In the company’s earnings release, interim CEO Craig Benson said several macro conditions are driving an increasingly cost-conscious consumer.
“We faced several headwinds that impacted our results, including a shift in consumer focus in the Modern Year to savings and concerns about rising Covid infections and other diseases,” Benson said.
He also said the company’s nationwide advertising campaign did not resonate with consumers as expected.
Despite the warning, analysts still see positive catalysts ahead for the company.
“Despite lowered forecasts, today’s results were not as faint as feared,” Piper Sandler analyst Korinne Wolfmeyer said. “We have now seen two key changes that were needed to supercharge the stock, including a fresh CEO and White Card valuation.”
Piper Sandler maintains a “buy” rating on Planet Fitness shares and a target price of $80. Shares are currently trading at about $65 apiece and are up more than 5% on Thursday.
The Street is positive about the company’s turnaround undertaken by fresh Planet Fitness CEO Colleen Keating, who will take up the role on June 10.
“We believe the fresh CEO’s prior experience in branding and leading consumer-facing businesses plays a key role here,” Wolfmeyer said.
