Planet Fitness Reports Q2 2020 Loss Due To COVID-19 Pandemic

(Photo courtesy Planet Fitness. ) Despite the lower second quarter revenue, Planet Fitness is in a position to widen its competitive mode after the COVID-19 crisis because of its franchise system and its ability to capitalize on expected industry consolidation and expected availability of prime real estate and lower rent, according to CEO Chris Rondeau.

Total revenue for Planet Fitness declined by 77.9 percent in second quarter 2020, the company announced on Aug. 4.

Second quarter revenue was $40.2 million with a net (loss) income of $29.2 million compared to income of $34.8 million during second quarter 2019. Net (loss) income decreased 180.3 percent to a net loss of $32 million compared to a net income of $39.8 million during the prior year period. Adjusted net (loss) income decrease 166.5 percent to an adjusted net loss of $27.9 million compared to adjusted net income of $42 million during second quarter 2019.

Despite the volatile COVID-19 situation that caused the declines, once the pandemic is over, Planet Fitness will be able to widen its competitive mode because of the strength, sophistication and diversification of its franchise system, company CEO Chris Rondeau said in a call with analysts. The company is well-positioned to capitalize on expected industry consolidation and prime locations for clubs that will become more available and at lower rent with enhanced landlord incentives, he added.

As of June 30, Planet Fitness and its franchisees had reopened 1,477 of its 2,059 clubs. Fifty-one of those locations are corporate-owned while the others are franchisee owned. The company opened 21 new clubs during the second quarter, which were included in the 2,059 club number.

Total membership declined four percent from the first quarter to 14.8 million, a decline that might have been even greater except that overall joins during the period outpaced prior year levels, despite Planet Fitness reducing its local and national advertising, Rondeau said.

In the third quarter, as some of the country began seeing an increase in COVID-19 cases, joins started to taper off, coming in relatively flat to prior year, but cancels also began to increase, particularly in states with a resurgence of COVID-19, Rondeau said in the call.

Despite that, usage has remained strong, particularly in clubs that have been opened the longest with usage plateauing at about 60 percent average compared to the prior year, he said.

Reopening of clubs was achieved through the execution of a reopening playbook the company put in place, according to Rondeau. The playbook adheres to guidelines laid out by state and local governments.

The company recently required everyone to wear a mask inside the clubs except while actively working out.

“We'll continue to proceed cautiously until there is greater certainty on when conditions will return to normal,” Rondeau said. “While the near-term operating environment is likely to remain volatile and negatively affect our near-term revenue and profitability, I am confident that Planet Fitness is well positioned to capitalize on the industry consolidation that we believe will emerge over the next several years and increased focus on health and wellness."

The company continues to host free and live United We Move workouts on Facebook, totaling more than 20 million views from 36 countries around the world.

Planet Fitness also is seeing increased use of its iFit digital content on its app, a recent partnership with iFit, which is a streaming home workout company. This offering is enabling a new avenue for engagement with existing and prospective members, Rondeau said.

Twenty-four percent of Planet Fitness digital content users were non-existing members. Our accelerated digital strategy while still in its early stages is proven to be a great engagement tool for existing members and for potentially acquiring new members. Adoption of the mobile app was at an all-time high in the second quarter with nearly 60 percent of new joins downloading the app in the quarter. During the month of June, Planet Fitness saw more in-app joins than during January 2020, Rondeau said. He called that development “pretty remarkable given January is our busiest new member signup period and was prior to COVID when 100 percent of our stores were open.”

To help support its franchisees, Planet Fitness has provided a 12-month extension on new store development obligations, re-equips, re-models and a 15 percent discount of equipment placed by the end of this year.

Rondeau expects less development during the next couple of quarters as franchisees focus primarily on training and supporting staff on new policies, procedures to successfully reopen clubs, keeping members engaged and rebuilding their cash positions, which were reduced during this period.

Suggested Articles:

Town Sports International is working on a deal with lenders and a private equity firm to buy the company after its Chapter 11 filing on Sept. 14.

Online-only trainers make more money than those who trained online and in-person or just in-person.

Flywheel Sports Inc. is liquidating the company in a Chapter 7 filing, closing its 42 studios and laying off 1,200 employees.