Xponential Fitness (XPOF 7.15%) investors beat the market by a wide margin in early Friday trading. Shares of the fitness franchise operator jumped 14% by 12:30 p.m. ET, compared to a 1% increase in the S&P 500.
The rally added up to big gains for shareholders, as the stock has increased by over 35% in the past full year. It was powered by a warmly received earnings update.
Xponential Fitness executives said before the market opened that sales in the Q4 period rose 44%. That result pushed annual sales up 58% to $245 million, beating the short-term outlook that management had raised back in mid-November.
The company continued to see strong demand for workouts in its studios, allowing sales to rise in existing locations even as the selling footprint expanded thanks to an aggressive pace of new openings. "I could not be prouder of all our franchisees and employees for making this success possible," CEO Anthony Geisler said in a press release.
Xponential Fitness managed a modest operating gain in the period and for the full year after losing money on that basis in 2021.
Management saved their most bullish comments for the topic of future growth. Xponential Fitness is planning to add as many as 560 new studios in 2023, or an additional 8% of its current total. With rising membership at existing locations, this push should lift revenue by about 18% to between $285 million and $295 million. Xponential Fitness is aiming to achieve much faster growth (39%) in adjusted earnings.
It's no surprise that investors cheered the optimistic outlook around sales and earnings growth. The company's results over the past year suggest that it has room to significantly expand its network of franchisees. While consumer preferences can change quickly in the fitness niche, Xponential Fitness is showing no signs of losing growth momentum heading into the 2023 fiscal year.