Town Sports International (TSI), New York, had a decrease in revenue and net income in second quarter 2014, according to financials released by the company Wednesday. TSI also announced it is converting at least 20 clubs this year to a high-volume/low-price model and will close nine clubs.
TSI's revenue decreased 3.7 percent to $115.7 million in second quarter 2014 from $120.1 million in the same period a year ago. Personal training revenue increased 3.6 percent in second quarter 2014 compared to the same period last year and represented 15.8 percent of total revenue in second quarter 2014.
TSI suffered a net loss of $919,000 in second quarter 2014 compared to net income of $6.2 million in second quarter 2013.
The total member count decreased by 8,000 to 488,000 in second quarter 2014. Membership attrition averaged 3.4 percent per month in second quarter 2014 compared to 3.3 percent in the same period last year.
The low-price conversion and nine club closings, which represent about 5 percent of the company's clubs, were announced by TSI CEO Bob Giardina.
"We were not satisfied with the first-half results, and we are taking aggressive steps to leverage the many assets the company possesses in order to drive membership that ultimately will [grow earnings]," Giardina told analysts on a conference call Wednesday. "More than 125 fitness clubs have opened in our markets over the last two years, and a large proportion of these openings have been lower-cost model clubs."
The membership price of the low-price model will be between $19.95 and $29.95, Giardina said, but services will remain unchanged at these clubs, which are predominantly in suburban markets. TSI will convert two clubs to the low-price model in August and 18 by the end of the year.
"These conversions will require very little, if any, capital spend," said Giardina, who added TSI will convert another 10 to 15 clubs to the low-cost model in first quarter 2015.
TSI's advertising for these clubs will increase five times per club compared to its 2013 budget. The company expects its member count at these clubs to increase from an average of 2,300 members to 6,000 members by 2016.
Giardina added the company has had a strong response to its first BFX Studio, which opened this month, and plans two more studio openings this year.
TSI expects revenue for third quarter 2014 to be between $115 million and $116 million compared to $117 million in third quarter 2013. The company expects net loss for third quarter 2014 to be between $1.9 million and $2.2 million.
TSI's stock price was $6.18 at the close of trading Wednesday on the NASDAQ Stock Market. However, during trading Thursday morning, the price had dropped to $4.86, a 21 percent decrease.
TSI owns and operates New York Sports Clubs, Boston Sports Clubs, Philadelphia Sports Clubs and Washington Sports Clubs. The company, which operated 163 clubs as of June 30, 2014, is set to close one Philadelphia Sports Club on Thursday.
TSI is No. 6 on Club Industry's Top 100 Clubs list, which was released today. The company reported $470.2 million in 2013 revenue, a decrease of 2 percent from the previous year.