Planet Fitness has announced an increase in its base-level membership prices for new customers, marking the first adjustment since 1998, even as the gym chain acknowledges a growing trend of cost-conscious consumers.
Starting this summer, new members will be charged $15 per month for the Classic card membership, whereas existing members will maintain their $10 monthly rate “for the duration of their membership,” the company stated on Thursday alongside its quarterly earnings report.
Tom Fitzgerald, the outgoing chief financial officer, noted that the benefit of the price adjustment may take some time to reflect in the store-level margins, as the increase applies solely to new Classic card memberships.
This decision follows months of price testing across various markets nationwide. Additionally, Planet Fitness revealed plans to experiment with higher pricing for its premium-tier membership, the Black Card, also starting this summer.
The Black Card membership offers access to any Planet Fitness location, along with digital content and other perks, starting at $24.99 per month.
The move to raise prices comes after the company reported lower-than-anticipated first-quarter revenue and adjusted its guidance for the fiscal year.
This contrasts with competitor Life Time Holdings, which posted stronger-than-expected results and notable membership growth in its latest quarter.
Life Time attracts an older, more affluent clientele compared to Planet Fitness, which targets a younger, budget-conscious demographic.
Interim CEO Craig Benson highlighted several macroeconomic factors influencing consumer behavior in the company’s earnings release.
These include a shift towards savings among consumers at the start of the year and concerns over rising Covid infections and other health issues.
Benson also acknowledged that the company’s national advertising efforts didn’t resonate as broadly with consumers as anticipated.
Despite these challenges, analysts remain optimistic about Planet Fitness’s prospects.
“Although guidance has been revised downwards, today’s results were not as weak as feared,” commented Piper Sandler analyst Korinne Wolfmeyer.
“Furthermore, we’ve witnessed two significant changes that have been necessary to reinvigorate investor confidence: the appointment of a new CEO and adjustments to White Card pricing.”
Piper Sandler maintains a “buy” rating on Planet Fitness stock with an $80 price target. As of Thursday, shares were trading at approximately $65 each, having gained over 5%.
Investor sentiment is positive regarding a potential turnaround under Planet Fitness’s incoming CEO, Colleen Keating, who assumes the role on June 10.
“We believe the new CEO’s prior experience in brand development and leadership of consumer-focused companies will be pivotal,” added Wolfmeyer.
