Planet Fitness rebound bodes well for SoulCycle IPO

Shares of Planet Fitness (PLNT) spiked on Friday after the company reported fourth-quarter results that topped Wall Street forecasts. Its 2015 revenue rose 18% to a record $330 million.

How has the New Hampshire-based fitness center franchise been able to do so well despite still-mixed data on consumer confidence and spending?

Low prices, for one. CEO Christopher Rondeau said membership at Planet Fitness, which went public in August 2015, rose 20% last quarter largely because of a “high value, low price” strategy that included a consumer-friendly $10 monthly fee. The “no frills” facilities — you won’t find any Planet Fitness gyms with expensive pools, group exercise rooms or daycare — fit a value-oriented consumer who increasingly cares about health and fitness.

Rondeau said he’s optimistic about the growth prospects and sees a rapid ramp-up in openings — from its current base of 1,124 stores to an as many as 4,000 locations across the U.S.

Rondeau pointed to the company’s deep franchise pipeline along with real estate opportunities from the closures of brick-and-mortar retailers that aren’t able to withstand Amazon competition.  Just this week, Sports Authority announced it will close about one-quarter of its 464 stores as part of its Chapter 11 bankruptcy.

Spinning studio SoulCycle is also trying to take advantage for the consumer and investor appetite for the fitness craze with a planned IPO for this year. At $35 a class, SoulCycle targets  the higher-end consumer — but there’s certainly room for the lower end of the gym spectrum, Rondeau said. Piper Jaffray’s Sean Naughton also believes both can do well, according to a recent survey conducted by his firm:

The bottom line: As Planet Fitness rises back to its IPO price of $16 per share, the outlook for the fitness space–high and low end–looks strong.