Discount Gym Chains Thriving Post Pandemic
COVID-19 Gym Crush
As COVID-19 lockdowns went into effect, gyms closed their doors, as they weren’t listed among “essential” businesses. Companies like Peloton (PTON) thrived, as the fitness-conscious had nowhere to work out other than their homes.
For many gym chains, this was too much to overcome. The immediate suspension of business activities led to several such companies filing for bankruptcy protection, including Gold’s Gym and 24 Hour Fitness. A notable holdout was Planet Fitness (PLNT), which kept itself afloat thanks largely to its structure: most locations are franchises, meaning the parent company faces lower operating costs.
Discount Chain Comeback
Somewhere along the way, amid the easing of lockdowns, people got tired of working out at home and started returning to fitness clubs. Planet Fitness, which has membership fees as low as $10 per month, recently surged back and gained firmer footing. The company delivered an upbeat profit forecast and added 100 new locations over the last year.
Investors seem to be noticing the trend and cash has been pouring into the broader gym sector. Planet Fitness executives say private fund managers have invested hundreds of million dollars into the company in the past few months. Some analysts say gym chains lagged behind the rest of the market in 2021, and that could mean growth is on the horizon.
Higher End Struggle?
Some market watchers say while discount gym chains are thriving, higher-end fitness clubs located in urban settings aren’t performing as well. Bay Club, which operates mostly on the West Coast and caters to higher earners living in LA and San Francisco, was selling debt at 90 cents on the dollar last summer. Still, there may be an upside in these types of brands as well.
There’s an alternate argument from some within the investment community that maintains higher-end gym brands are poised for long-term success. This is rooted in the higher spending power of the members such clubs attract, as well as built-in alternate revenue streams like golf courses, tennis courts, and onsite restaurants. For now, it’s the discount gym options like Planet Fitness that are really flexing their muscles.
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