People work out at a Planet Fitness in Alexandria, Virginia, U.S., January 8, 2024.
Leah Millis | Reuters
Planet Fitness is hiking its base-level membership prices for new customers for the first time since 1998, even as the gym operator warns its customers are growing increasingly cost-conscious.
Classic card membership will be priced at $15 per month for new members starting this summer, while current members will continue to pay $10 “for the duration of their membership,” Planet Fitness said Thursday alongside its quarterly earnings report.
“It will take some time for the benefit of the price change to expand our store level margins as the price increase will only be on new classic card membership,” said Tom Fitzgerald, the company’s outgoing chief financial officer.
The change comes after months of price testing in several markets around the country. Planet Fitness also said it will start testing higher prices for its top-tier membership, “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 weaker-than-expected first-quarter revenue and cut guidance for the fiscal year, in contrast to competitor Life Time Holdings, which posted better-than-expected results and strong membership growth for its most recent quarter.
Life Time members tend to be older, more affluent long-time gym goers, whereas Planet Fitness appeals to a younger, more budget-conscious consumer.
In the company’s earnings release, interim CEO Craig Benson said several macro conditions weighed on an increasingly cost-conscious consumer.
“We faced several headwinds which impacted our results including a shift in consumer focus in the New Year to savings and concern over the increase in Covid infections and other illnesses,” said Benson.
He also said the company’s national advertising campaign failed to resonate with consumers as broadly as the company anticipated.
Despite the warning, analysts still see positive catalysts ahead for the company.
“Despite lowered guidance, results today were not as weak as feared,” said Piper Sandler analyst Korinne Wolfmeyer. “And we’ve now seen two key changes occur that have been needed to recharge shares, including a new CEO and White Card pricing.”
Piper Sandler maintains a “buy” rating on Planet Fitness stock and an $80 price target. Shares currently trade for about $68 apiece, having gained about 9% Thursday.
The Street is bullish on a company turnaround from Planet Fitness’ incoming CEO, Colleen Keating, who assumes the role on June 10.
“We see the new CEO’s past experience in brand building and leading consumer-facing companies as being instrumental here,” said Wolfmeyer.