Summary
The company had a fantastic first quarter, adding 1 million net new members.
The company is only a fraction of the way to its planned total of 4,000 store in the US and 300 stores in Canada.
Expansion throughout Latin America will then be the next chapter of this growth story.
We expect the company to produce a shareholder return of 11%.
It’s been just over four months since we invested in Planet Fitness (NYSE:PLNT) and there have been more ups and downs with the share price than a bench press. With the shares up 9% now, we once again revisit this potential growth machine to see if the future growth still exists, or whether it is time to let this one go.
Planet Fitness is divisive as a stock and a gym. Some people love their no judgment and pizza-giving gyms, whereas others think they’re nothing short of a fad. With the stock, there are some like ourselves who see a lot of long-term growth ahead, and then there are those who see it as unsustainable. Whatever your thoughts on the gyms or the stock, we feel it is only fair to give management a pat on the back for a great first quarter.
Planet Fitness delivered a strong performance in the all-important first quarter with earnings per share coming in at 15 cents and revenue growth of 8.3% year over year to $83.84 million. Furthermore, system-wide sales increased by 6.8% during the quarter, with solid growth in both the franchise and company-operated segments. Management offered full year revenue guidance of $360 to $370 million, 210 to 220 net new store openings, and same store sales growth in the mid-single digits. In the first quarter, the company added 48 new gyms bringing it to a total of 1,171 gyms.
This level of growth is what we find most appealing, especially when you consider that this is just a fraction of what management sees in the future. It believes there is room for 4,000 gyms in the United States and 300 in Canada. Then there is the international market, which they believe is largely untapped. We are optimistic about the international expansion, but don’t think it will be an easy one and expect it will take time and patience. Latin America has been earmarked as the next step, thanks to the brand being well received in Puerto Rico.
