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Planet Fitness CEO on the fitness industry amid the pandemic

Planet Fitness CEO Chris Rondeau joins Yahoo Finance Live to discuss the state of the fitness industry almost a year into the lockdowns and restrictions caused by the coronavirus pandemic, and how his company is company is adapting to at-home fitness trends.

Video Transcript

[MUSIC PLAYING]

BRIAN SOZZI: All right, it's been a tough slog for the fitness industry during the pandemic as some gyms closed for good and others operate at reduced capacity. Let's check in with gym leader Planet Fitness and its CEO Chris Rondeau. Chris, always good to-- good to speak with you.

Last night, I was thinking back to all the conversations we've had, maybe going back seven years, day one of Planet Fitness. And we've always talked about your brand being about inclusion and unity. We'd love to get your thoughts on what we witnessed yesterday on Capitol Hill.

CHRIS RONDEAU: You know, it's so unfortunate as a country. You know, and we can do so much better than that, and we are better than that. So I think we've got to, you know, let things go and stream by and move on and everybody just work together. You know, we've got COVID to deal with. This is important times right now that we've got to really come together here and move forward as a country.

BRIAN SOZZI: No, absolutely. I couldn't agree with you more. But let's talk about your business right now. What are you seeing in membership trends? You know, I think a lot of people on the Street are looking for your membership numbers to bottom. Has it bottomed? What do you see?

CHRIS RONDEAU: Yeah, so we saw a big dip actually in the second quarter-- we started to open our stores in May-- and then third quarter too. But what we started to see, although going back, was that the trend was slowing, which was great. And, you know, we ended the year a little lower than we did in third quarter but was happy to see that the trajectory of the decline was slowing. And I see-- what we're seeing in volumes of joins now, really excited about what we're seeing for January. And it was getting really good even fourth quarter too.

So interesting to see that people are really ready to get off the couch. They're listening to our message with the marketing, and they're joining. And I work out at my local Planet, and I can definitely see just the last few days here that even the traffic is picking up too, working out.

And we opened stores back in May. We were only doing like 30% of last year's workout volume, and we ended the year at about 76% of last year's workout volume. So it was definitely people getting ready to get off the couch and get physical again, which is great.

MYLES UDLAND: You know, Chris, the fitness industry is one that is often driven by big trends. Some might call them fads. Some might disagree with that. Right now, it's all about working out at home and riding your Peloton by yourself on that screen. Do you feel like that is a direct competitor to your customer, or do you think you're offering something different to someone who might want to have a Planet membership but then also be able to work out at home with something like a Peloton?

CHRIS RONDEAU: You know, that's a good question. You know, home fitness has been around forever. And I've always said, you know, from Jane Fonda and Billy Blanks with Tae Bo and Richard Simmons to P90X, and everybody remembers that stuff.

And Peloton's a good product, but I also look at, you know, for the price point that it is and for the customer that they go after, it's very difficult than a Planet customer. You know, $10 a month memberships and we're all 50 states.

And you think about, you know, this for a second. 80% of the US population lives paycheck to paycheck, and 25% of our stores are in neighborhoods that the government considers low income. So we're really servicing a need. We democratized fitness and brought it to the masses here in the US. And with, you know, 14 million members here at the end of the third quarter, we're really getting people off the couch, and 40% of those had never belonged to a gym in their entire life. So we're truly moving the needle here of getting people active.

JULIE HYMAN: Yeah, I remember my mom's old Richard Simmons record that she used to work out to when you're talking about old work out at home trends.

How many of your gyms are open now, Chris? And, you know, day by day, are you being affected by some of the new shutdown rules that go into effect and then come out of effect?

CHRIS RONDEAU: Sure. That's a good question. So we have about 1,800 stores open out of about 2,100 today. And there's been-- you're right. We've been open, closed, open, closed in a few of our states here, which has been a little bit of a struggle, but luckily we've been able to manage through it.

The franchisees have worked really closely with us here to make the members happy and get them through this and get them, you know, reopened and get the clubs feeling cleaned, make sure they see all the sanitization that we have in place, and really using our app because we have a lot of good features in our app to help people feel comfortable with the gym. We have a crowd meter that you can literally see how busy the club is before you leave your house so you can figure out the time that's best for you to make yourself feel comfortable and also cleanliness standards and protocols in place. And when I work out at my local Planet, I feel totally safe.

JULIE HYMAN: You know, when you talk about the cleanliness standards, I'm curious about the ventilation in particular because really that has been the main vector of spread, right, the HVAC systems. Have you guys had to retrofit the gyms, and how costly has that been?

CHRIS RONDEAU: Yeah, a good thing is our gyms are very big and spacious, 20,000 square feet, open ceilings. So we don't have a lot of small rooms, and we're not like a boutique that's only a thousand square feet-- 20,000 square feet. Great ventilation, and the MERV 13 filters you hear people talk about a lot, a lot of our centers already use those, and we've retrofitted the rest with them. So that's actually helped that a lot as far as making sure the ventilation is good. And the air circulation is turned over quite frequently.

BRIAN SOZZI: Chris, since we last spoke, Peloton went out there and really paid a lot of money to buy fitness-equipment maker Precor. As someone that has been in the gym industry for a while like you, are you concerned that over time Peloton cuts off gym chains from getting new equipment?

CHRIS RONDEAU: No, I don't believe so. I mean, I think they use them probably a lot for their manufacturing capabilities, but there's other manufacturers out there like Matrix and Precor-- Life Fitness, rather. So there's other ones we can use, and we actually use Life Fitness and Matrix mostly at this point. So there's many other options out there for us. And Precor's a great brand too. They've been around for a long time. But I don't think there's any issue there in that sense.

BRIAN SOZZI: Chris, my local New York Sports Club closed because of their bankruptcy. And in that environment, really probably within a 10-mile radius, there's nowhere to work out. Are you a buyer of those locations that are now empty? And it's not just New York Sports Club. It's a 24 Hour Fitness. What's your plan there?

CHRIS RONDEAU: Yeah, so, you know, if the location makes sense, possibly, you know, certain ones. But, honestly, with today's landscape and the closing of retail-- which has been going on, really, since 2009, 2010-- this is going to even open the doors more for more real-estate availability. The closing of clubs would even add more to that.

So I wouldn't look at it because it's a-- because it's a gym, Brian, I wouldn't look at that that it's an easy conversion. Our brand is very different, so we would have to completely renovate it. But just the freeing of real estate in general will just give us more options here to open stores in the future. And as we've talked about, I view us potentially pegged at 4,000, so we're only halfway there.

MYLES UDLAND: And then Chris, finally before we let you go, I just want to ask about what's happening in the gyms, what your customers are doing, your members are doing when they're in the gym. Is it cardio now? Is it strength? Sort of where have those trends taken us, and where do you think that heads in the next decade?

CHRIS RONDEAU: Yeah, cardio has always been king and for our clubs for sure. What I think has been interesting-- and I think digital fitness has really helped with this. And the one thing I think coming out of COVID, a little brightness to it, I think, is people have learned how to use digital better to get more out of their workouts, which is why in our app we've launched a bunch of-- 500 free workout videos in our app for free and then made a partnership with iFit and launched a subscription model to have enhanced content because we see people in our clubs all the time utilizing their app and following routines. And I think coming out of it, people will utilize that to get better results in the future. And variety is key too because you don't get bored with it. So I think that's some good stuff, and we'll see a lot of that in the clubs going forward.

What's interesting what we've seen is I think just from people's life and digital from buying everything online the last, you know, six or eight months is that our joins, digital joins are up to 60% of all joins are joining digital, which was only 40% last year. So they're actually joining gyms like us digitally as opposed to walking in and taking a tour like they used to.

BRIAN SOZZI: Come on, Chris, you and I both know that cardio days stink. It's all about that bench press and seeing how much you can bench press and probably get it out there on Instagram, right?

CHRIS RONDEAU: It's like the old days, right? [LAUGHS] That was hard. Keep the heart good.

BRIAN SOZZI: Yeah. No, for sure. All right, let's leave it there. Planet Fitness CEO Chris Rondeau, always good to see you. Stay safe, and we'll talk to you soon.

CHRIS RONDEAU: Thank you, Brian.