Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Town Sports International Holdings (NASDAQ:CLUB) were looking out of shape today, dropping as much as 22% after a weak fourth-quarter earnings report. 

So what: The parent of New York Sports Clubs and other similarly named health clubs in the Northeast saw key numbers moving in the wrong direction, as total member count fell by 10,000 in the quarter to 497,000 and revenue dropped 0.3% to $113.9 million. Comps were also down 1.3%, and adjusted profit came in at breakeven, below estimates of a $0.03-per-share profit. CEO Robert Giardina said the company was "not satisfied with 2013 results," but he was optimistic about the future, noting advancements in personal training, its new BFX Studio brand, and pricing improvements.

Now what: Declining membership is never a good sign for a business, especially one that depends almost entirely on membership dues for its revenue. With 108 gyms in New York alone, Town Sports may have reached the saturation point in many markets it's entered. Its 7.3% dividend yield and a well-known brand name make it potentially appealing as an investment, but I'd like to see membership moving in the right direction first. Management expects falling revenue and break-even profits -- against an estimate of $0.17 -- for the current quarter, so shares could slide more before they bounce back. 

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Jeremy Bowman has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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