Life Time Group (LTH 0.28%) reported third-quarter 2023 financial results this morning and investors weren't pleased with the results. Shares dropped as much as 13.6% in early trading and are down 12% at 11:45 a.m. ET.
The fitness company keeps growing as it scales gyms and raises prices, but if that doesn't translate to the bottom line it's hard to see value in the stock.
Life Time's earnings disappoint
Overall, revenue rose 17.9% to $585.2 million but net income fell from $24.7 million a year ago to $7.9 million, or $0.04 per share. On an adjusted basis, earnings were $26.7 million, or $0.13 per share.
Analysts were expecting $586 million in revenue and earnings of $0.15 per share, so results fell slightly below expectations across the board.
Cost pressure impacts Life Time Fitness
In the fourth quarter, management expects revenue to fall to $555 million to $565 million and net income to be between $14 million and $17 million. So, increasing the bottom line has been difficult, despite raising membership dues by 11.1% in the first nine months of the year.
Rising costs from new club openings and spending at existing clubs were blamed for the relatively poor results. But it's hard to see how Life Time is going to increase revenue or profits much in the future. Membership dues are already $241 per month and given consumers are spending less on discretionary purchases as home, auto, and food costs rise it's hard to see an ability to raise prices further.
With that in mind, it's hard to see how Life Time can improve much from here and the bottom line could deteriorate quickly if there are any hiccups in the economy. That's why the stock is selling off and I don't see a quick recovery for shares.
