The coronavirus outbreak has rattled most of the industries and Planet Fitness, Inc. PLNT isn’t immune to the trend. Due to the coronavirus outbreak, the company has temporarily closed majority of system-wide and corporate stores. Following the news, the company’s shares tanked 22.2%. In the past month, the company’s shares have tumbled 68.7%, compared with the industry’s decline of 64.9%.
The company’s stores will be closed till March 31. Notably, the company will reassess the timing of reopening the stores. CEO Chris Rondeau said “As one of the largest operators in the Fitness industry, with the most members, we believe it is our civic duty to take this necessary action in order to protect our members, team members and the communities where our stores are located.”
The company has also suspended its share repurchase program for the time being. The company will utilize its strong levels of liquidity to fund ongoing operating expenses due to the outbreak. At the end of 2019, the company had $436 million of cash.
Despite the shutdown of stores, the company’s members have the option for in-home workouts. The company has included 500 exercises in its mobile app.
We believe despite the outbreak of coronavirus the Zacks Rank #3 (Hold) company will be able to retain its members due to low-cost gym model. Although the nature of the business is traditional, the company’s strategy to attract customers with a $10-a-month membership fee and no-frills atmosphere has helped it gain a significant share in existing market and expand market size. The low-cost model has also helped Planet Fitness to tap into the market that is enthusiastic enough to join a cheaper second gym. Despite a lower-than-peer membership fee, higher demand and lower costs have helped the company generate above-average profits.
Some better-ranked stocks in the leisure space include Manchester United plc MANU, AMC Entertainment Holdings, Inc. AMC and The Madison Square Garden Company MSG. All these stocks have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Manchester United and AMC Entertainment Holdings have an impressive long-term earnings growth rate of 22.8% and10%, respectively.
Madison Square Garden reported better-than-expected earnings in second-quarter fiscal 2020.
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