Planet Fitness (NYSE: PLNT) rounds into tip-top shape, as competitors struggle

Planet Fitness (NYSE: PLNT), the largest US fitness-center chain, is improving its own conditioning, as new members join its clubs and pay a higher rate to do so. This success has come while other fitness clubs suffer.
The gym chain, which has 19.7 million members and 2,722 clubs around the world, has enjoyed a 44% surge in its stock price over the last 12 months.
Other fitness companies have lost customers, as people got used to exercising at home during the pandemic. In addition, some equipment was too complicated for them, and many consumers were happy to use Ozempic and other anti-obesity drugs rather than working out in a gym.
However, Planet Fitness has been able to thrive, with prices among the lowest in the business and simple, no-frills gyms.
Last year, Planet Fitness raised its membership dues for the first time since 1998 – by 50% to $15 a month. The increase applies only to new members. And Planet Fitness memberships still go for about one-third of the price for full-service fitness facilities.
Plenty of Planet Fitness customers barely use their memberships, but neglect to cancel them, which means easy money for the company. Planet Fitness also has drawn the Generation Z cohort with a focus on strength over cardio equipment.
Franchisees appreciate the fact that strength equipment is cheaper than cardio equipment. Planet Fitness sells them their equipment at a profit.
Solid earnings numbers
The company saw same-store sales increase 5% last year. Profit gained 3% in the third quarter from a year earlier. Planet Fitness opened 150 new clubs in 2024. With 90% of its clubs franchised, it takes on little capital risk.
It overcame a controversy last March when it cancelled the membership of a woman who photographed a transgender customer shaving in the women’s locker room. The photo went viral, and Planet Fitness temporarily suffered membership cancellations and a drop in new memberships. But the weakness didn’t last, as customers came back.
Of course, valuations look rich for Planet Fitness. It has a forward price-earnings ratio of 41 compared to 22 for the S&P 500. That sounds a note of caution.
But if the company succeeds in its goal to expand to 5,000 clubs, perhaps it can grow into its valuation. It has a rising presence overseas, including Australia, Mexico and Spain.