TSI Hit with Revenue, Membership Decreases

NEW YORK -- Town Sports International Holdings Inc. (TSI), New York, had a tough third quarter with lower revenue and memberships than in third quarter 2008, according to the company’s financials released yesterday.

“Our third quarter results basically reflect where we thought our business would be for the quarter and also where it would be at this point in the cycle as we looked at 2009 at the start of the year,” Alex Alimanestianu, CEO of TSI, said in a call with shareholders and analysts.

For third quarter 2009, revenue decreased 6 percent to $120.4 million compared to the same period last year, and comparable club revenue decreased 7 percent.

Membership was 494,000 as of Sept. 30, 2009, a decrease of 9,000 members from second quarter 2009, but less than the second quarter 2009 decrease of 15,000 members from first quarter 2009. However, it was a decrease of 25,000 or 4.8 percent compared to Sept. 30, 2008.

“While our most recent trends in membership sales are improving at the margin, it takes a full year for membership declines or advances to flow through our earnings model,” he said. “We will have far more clarity around membership growth trends after we see results for the month of January, which as most of you know, is our most important sales month of the year.”

Membership attrition averaged 4.2 percent per month compared to 3.6 percent in third quarter 2008 and 3.7 percent in second quarter 2009.

“We expect attrition in the fourth quarter to be relatively consistent with a year ago, which should be an improvement from the first nine months of the year,” Alimanestianu said.

One particular area of improvement has been the company’s new membership.

“August and September results were better than July, and the third quarter felt better to us than the second quarter,” Alimanestianu said. In the Washington, DC, area, where he says employment has improved, Alimanestianu said they had double-digit new member sales gain versus the prior year.

“Hopefully, Washington’s improving economy and employment trend will be migrating north in the near future,” he said.

Alimanestianu also added that the rebound and profitability at the big Wall Street banks is a positive development for the economy of the New York metropolitan area, where TSI has a large number of clubs.

“So we at Town Sports are pretty big fans of Wall Street bonuses. I am sure we are in a minority on that,” he said.

This year, the company closed nine clubs, but Alimanestianu said the number of clubs to close next year will probably be lower, although he couldn’t give a number as they were still evaluating clubs. He did say that TSI signed two leases for new clubs and expects to open one of them next year.

TSI expects revenue for the fourth quarter to be between $112.5 million and $114.5 million versus $122.9 million for the fourth quarter of 2008.

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