Published on 23 May 2024 on Zacks via Yahoo Finance

Here's Why You Should Retain Planet Fitness (PLNT) Stock

Planet Fitness, Inc. PLNT is likely to benefit from store expansions, strategic pricing adjustments and a New Growth Model. This and the emphasis on smaller store footprint and market penetration bode well. However, a fall in website traffic and a less effective advertising campaign are a concern.Let us discuss the factors that highlight why investors should retain the stock for the time being.

Growth Drivers

Planet Fitness is emphasizing strategic partnerships and international growth to drive expansion. In first-quarter 2024, the company opened 25 new stores and plans to open 140-150 new locations throughout the year, including franchise and corporate stores. With favorable market conditions and a strong growth trajectory, the company is confident in reaching this target.Alongside domestic growth, Planet Fitness is excited to enter the Spanish market. Significant investments were made in the fiscal first quarter to accelerate this expansion. This strategic move follows recent progress in developing markets such as Mexico and Australia.The company is considering adopting a smaller store footprint to facilitate expansion into suburban areas and new regions that may not meet standard population requirements. Planet Fitness aims to continue its trend of increasing market penetration across different age generations, focusing on the local market analysis.Planet Fitness is undertaking effective pricing strategies to counter the impacts of the inflationary environment. The company is focusing on offering top-tier services to its members, which suffice more than the price increases, along with creating growth opportunities for the long term.During 2023 fall, the company-initiated trials involving two pricing tiers, $15 and $12.99 and implemented in around 100 stores. An additional trial was launched in December 2023 in New York, maintaining a fixed price of $14.99. These pricing tests were made through the April 2024 sale period using a disciplined data-driven approach to determine the best balance between the higher dues while minimizing loss of membership. Per the learnings from the approach, the company decided to change the price of the Classic Card membership to $15, which will be effective from 2024 summer only for new members. This new price drove a significant increase in average unit volumes with the least impact on the rate of joins.Planet Fitness intends to capitalize on its scale advantage by refining its strategies to stay ahead of competitors. During fourth-quarter 2023, the company unveiled to franchisees a New Growth Model, aiming to improve the economics of new stores and lower capital requirements. This involves modifications to franchise agreements, adjusting equipment re-equipping schedules based on usage patterns and declining capital expenses for new constructions and renovations while streamlining operating costs. The company is focused on implementation and is confident that the fresh approach will be beneficial for franchisees and the franchisor.