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PLNT – Market expectations are for Uniform ROA to rebound, but management may have concerns about member retention, advertising, and gym reopening

July 1, 2021

  • Planet Fitness, Inc. (PLNT:USA) currently trades above historical averages relative to UAFRS-based (Uniform) earnings, with a 42.5x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about member retention rates, advertising capabilities, and gym reopening performance
  • Specifically, management may lack confidence in their ability to increase their member retention rate, mitigate declines in equipment sales, and improve their adjusted EBITDA. Furthermore, they have concerns about the impact of waiving annual fees, the potential of their advertising campaigns, and the status of area development agreements with franchisees. Moreover, management may lack confidence in their ability to stay ahead of low-cost competitors, continue recovering to pre-pandemic levels, and capitalize on real estate opportunities. They may also have concerns about the sustainability of franchisee reopening performance, the pace of gym reopening in Canada, and the impact of seasonality on their sales cadence. Finally, management may lack confidence in their ability to provide better services and guidance to customers, maintain high levels of sanitation across gyms, and expand their gym presence