Planet Fitness Profits Soar

Planet Fitness (PLNT 1.07%) reported third-quarter financial results on Nov. 6. With the gym chain's low-cost memberships and welcoming culture appealing to people of all ages and fitness levels, sales and profits were sharply higher.

Planet Fitness results: The raw numbers

Data source: Planet Fitness Q3 2018 earnings press release.

What happened with Planet Fitness this quarter?

The company continues to deliver some of the most impressive comp growth in the retail industry. Systemwide same-store sales jumped an incredible 9.7% in the third quarter.

These gains come even as Planet Fitness is rapidly expanding its store count. The company opened 41 new fitness centers during the quarter and a total of 214 locations over the past year. That brought its total store count to 1,646 at the end of Q3.

Together, these new store openings and strong comps helped fuel a 40% jump in revenue, to $136.7 million.

In a press release, CEO Chris Rondeau said, "The combination of our high value, low cost, non-intimidating fitness concept and differentiated business model continues to drive solid top- and bottom-line improvement."

It should be noted, however, that $11.4 million of this revenue was collected by Planet Fitness from its franchisees for its advertising fund, which it uses to pay for marketing campaigns on their behalf. Planet Fitness began reporting these funds as revenue earlier this year due to new U.S. GAAP revenue recognition standards. But even if we adjust for this, Planet Fitness' revenue growth still checked in at a hefty 28.5%.

Better still, the company's profits are growing even faster; adjusted net income surged 47.9% to $27.7 million, or $0.28 per share.

Planet Fitness pumped up its profits in the third quarter. Image source: Getty Images.

Looking forward

Based on these strong results and current sales trends, Planet Fitness raised its full-year guidance for 2018. Management is now forecasting:

• Total revenue growth of approximately 33%, up from a previous forecast of 26%.
• Systemwide comps growth of 10%, up from a range of 9% to 10%.
• Adjusted net income and adjusted EPS growth of 43%, up from 33%.

"With the potential to increase our U.S. presence to approximately 4,000 stores while at the same time enhancing the member experience through in-store initiatives and brand partnerships, we believe the company is well positioned to deliver continued long-term profitable growth and return greater value to shareholders in the years to come," Rondeau said.