Life Time Fitness Eyes $1 Billion and East Coast

Life Time Fitness Eyes $1 Billion and East Coast

As Life Time Fitness announced 9.5 percent revenue growth in the first quarter, its CEO said the company may hit $1 billion in revenue this year as it ramps up plans for growth in number of clubs and related businesses and as it increases spending on marketing to improve retention.

“Our goal of $1 billion in 2011 is achievable,” Bahram Akradi, chairman, president and CEO of the Chanhassen, MN-based company, said in a conference call with analysts announcing first quarter 2011 financial results. “We will do all we can do to achieve this milestone.”

Life Time Fitness’ first quarter 2011 revenue grew 9.5 percent to $240.6 million compared to $219.8 million from the same period last year. Net income for the quarter was $20.8 million compared to $17.8 million in first quarter 2011. Net income for the quarter was $20.8 million compared to net income of $17.8 million for first quarter 2010.

The company has 90 locations spread across 20 states, but Akradi said his primary area of interest for expansion is on the East Coast, where the company already has clubs in New York, New Jersey and Maryland. “We have some incredible sites in the works,” he said, although he wouldn’t give exact timing. “We are excited about the places we are going and the opportunities we have.” Life Time opened a club in Syosset, NY, in the first quarter. In May, the company will open two clubs—one in Colorado Springs, CO, and the other in Summerlin, NV. Life Time will expand much faster starting in the second half of this year and into 2012, Akradi says. The growth will be balanced between adding more locations and adding other businesses that support the healthy way of life approach that the Life Time clubs are targeting. Those businesses could be events (such as marathons), wellness services or chiropractic services. Akradi, who said that the company reviews dues pricing at each club monthly, plans to increase dues and enrollment fees at some clubs. In particular, the company is increasing dues for members who were given discounts to attract them from lower-priced clubs that had gone out of business. “My vision is every member in every club will pay the same rate,” Akradi said. “And we wouldn’t have special prices for anyone.” The company would be able to justify those higher prices by differentiating on services and programming. “Our goal is to differentiate Life Time Fitness so we don’t have to play in the price segment,” he said, noting that Life Time’s average member price compared to all other national chains is two to three times more. “So, we have focused ourselves on delivering programs—not just equipment—high-quality people and well-run facilities. We want to get to the point where price is not a factor. I feel we are 80 percent there from two years ago. I’m comfortable with the way we have strengthened our brand.” For the year, Akradi expects revenue to increase 7 percent to 9 percent or $980 million to $995 million, primarily due to growth in in-center revenue and corporate businesses, as well as membership growth in new and ramping centers. Net income is expected to increase 14 percent to 18 percent or $92 million to $95 million. Memberships in the first quarter grew 6 percent to 650,784 from 613,882 at the end of first quarter 2010. Quarterly attrition in first quarter 2011 was 8.4 percent, down from 8.5 percent in the prior-year period. Attrition for the trailing 12-month period was 36.1 percent compared to trailing 12-month attrition of 39.3 percent at the end of first quarter 2010.