People workout at a Planet Fitness in Alexandria, Virginia, January 8, 2024.
Leah Millis | Reuters
Planet Fitness said it is raising basic membership prices for new customers for the first time since 1998, even as the gym operator warns customers are becoming increasingly cost-conscious.
Classic Card membership will cost $15 per month for new members starting this summer. Current members will continue to pay $10 per month “for the duration of their membership,” Planet Fitness said Thursday alongside its quarterly report.
“It will take some time for margins to increase at the store level because the price increase will only apply to new classic card memberships,” said Tom Fitzgerald, the company's outgoing chief financial officer.
The change comes after months of price testing in various markets across the country. Planet Fitness also said it will test higher prices for its flagship membership, known as the Black Card, this summer. That membership gives 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 sales and lowered guidance for the fiscal year, unlike competitors. Lifelong possessionswhich posted better-than-expected results and strong membership growth in its most recent quarter.
Life Time members tend to be older, more affluent gym-goers, while Planet Fitness appeals to a younger, more price-conscious consumer.
In the company's earnings release, interim CEO Craig Benson said several macro conditions were weighing on an increasingly price-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 increases in Covid infections and other illnesses,” Benson said.
He also said the company's national advertising campaign did not resonate as widely with consumers as expected.
Despite the warning, analysts still see positive catalysts for the company.
“Despite lowered expectations, today's results were not as weak as feared,” said Piper Sandler analyst Korinne Wolfmeyer. “And we have now seen two major changes take place that were needed to recharge the stock, including a new CEO and White Card awards.”
Piper Sandler maintains a buy rating on Planet Fitness stock and a price target of $80. The shares are currently trading for about $68 each, after gaining about 9% on Thursday.
The Street is optimistic about the company's turnaround from new Planet Fitness CEO Colleen Keating, who takes on the role on June 10.
“We view the new CEO's past experiences building brands and leading consumer-facing businesses as an important factor here,” Wolfmeyer said.