Analysts at William Blair believe the “Judgement Free” gym brand will continue to dominate the U.S. fitness market, although upstarts like Crunch and EoS could flourish as well
Planet Fitness is well-positioned to maintain its status as top dog in the American fitness industry over the coming years, fending off competition from a crop of fast-growing high-value, low-price (HVLP) gym brands, analysts say.
In a recent equity research note from investment bank William Blair, analysts predicted that Planet Fitness will continue to lead the HVLP gym segment despite the rise of competitors including Crunch Fitness, EoS Fitness, Vasa Fitness and Chuze Fitness.
While brands like Crunch and EoS are flush with private equity cash and are opening gyms at a rapid clip, the William Blair analysts noted they’re still nowhere near Planet Fitness in terms of size and scale. And the “Judgement Free Zone” gym brand is still in growth mode, looking to roughly double its domestic footprint to 5,000 locations over the next few years. By contrast, Crunch, the second-largest HVLP gym brand, has around 500 locations open worldwide.
“Sheer numbers alone are likely to sustain Planet Fitness’s leadership in the HVLP segment,” the analysts wrote.
If current average membership figures hold, hitting the 5,000 location mark would give Planet Fitness around 37.5 million members, a staggering number representing roughly 11% of the U.S. population, the analysts noted.
“We believe the combination of Planet’s affordable monthly dues and non-intimidating atmosphere … renders such a target achievable,” they wrote.
The HVLP gym segment as a whole is red-hot, with more and more young Americans joining low-price gyms, often at the expense of mid-priced clubs, whose future is in peril.
Still, there’s been some belief among investors that so-called “HVLP 2.0” brands like Crunch and EoS could chip away at Planet Fitness’ member base since they offer amenities, such as infrared saunas, advanced fitness programming and heated group classes, that aren’t typically found at PF locations.
However, the team at William Blair believes a rising tide will lift all boats, including Planet Fitness, as the HVLP segment continues to grow.
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“While adding complexity, we believe the additional amenities offered by the newer crop of HVLP brands … will likely broaden the appeal of the segment even further by potentially bringing in more seasoned fitness club members,” they wrote. “As a result, we remain constructive on the opportunities for other brands to further accelerate growth of the HVLP segment, albeit not necessarily at the expense of Planet Fitness.”
In response to increased competition, Planet Fitness has sought to revamp its marketing strategy and invest in more strength training equipment under CEO Colleen Keating, seeking to position itself as a place for serious gym buffs alongside newbies.
“We’re beginning the shift to communicating the high value of a Planet Fitness membership versus primarily focusing on our low price and using our marketing to demonstrate the breadth of high-quality, top-tier equipment in our club,” Keating explained during an earnings call last fall.
William Blair isn’t the only firm that’s bullish on Planet’s prospects under Keating. Late last year, analysts from TD Cowen expressed optimism in the brand’s future, pointing to the new marketing and strength training strategy, along with key executive hires. They also believe Planet Fitness’ decision to increase its base-level membership price from $10/month to $15 will pay off in the long run.