People exercise at Planet Fitness in Alexandria, Virginia, on January 8, 2024.
Leah Millis | Reuters
Planet Fitness said it is raising basic-level membership prices for new customers for the first time since 1998, even as the gym operator warns that customers are becoming more cost-conscious.
Classic Card membership will be priced at $15 per month for new members starting this summer. Existing members will continue to pay $10 a month “for the duration of their membership,” Planet Fitness said Thursday along with its quarterly earnings report.
“It will take some time for the benefit of the price change to expand our margins at the store level, as the price increase will only apply to the new classic card membership,” said Tom Fitzgerald, the company's outgoing chief financial officer.
The change comes after months of pricing testing in several markets across the country. Planet Fitness also said it will begin testing higher prices for its premium membership, known as Black Card, this summer. That membership offers 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 raise prices comes after the company reported lower-than-expected first-quarter revenue and lowered its guidance for the fiscal year, unlike its competitor. Lifetime Stakeswhich posted better-than-expected results and strong membership growth in its most recent quarter.
Life Time members tend to be older, wealthier gym users, while Planet Fitness attracts a younger, more budget-conscious consumer.
In the company's earnings release, interim CEO Craig Benson said several macroeconomic conditions were weighing on an increasingly cost-conscious consumer.
“We faced several headwinds that impacted our results, including a shift in consumer focus in the New Year toward savings and concerns about rising Covid infections and other illnesses,” Benson said.
He also said the company's national advertising campaign failed to resonate with consumers as widely as expected.
Despite the warning, analysts still see positive catalysts for the company.
“Despite the lowering of forecasts, today's results were not as weak as feared,” said Piper Sandler analyst Korinne Wolfmeyer. “And now we've seen two key changes that have been necessary to reload the stock, including a new CEO and the White Card price.”
Piper Sandler maintains a “buy” rating on Planet Fitness shares and an $80 price target. Shares are currently trading at about $68 each, having gained about 9% on Thursday.
The Street is optimistic about the company's turnaround by incoming Planet Fitness CEO Colleen Keating, who will take over on June 10.
“We see the new CEO's past experience in building brands and running consumer-facing companies as critical in this regard,” Wolfmeyer said.
