Gym outlet Planet Fitness Inc. (NYSE: PLNT) posted strong numbers for the most recently reported quarter. Revenue rose 11.6% year over year to $248 million, and same-store sales increased 6.2%. Earnings rose from $0.27 per share to $0.39.
The most important part of the earnings release was a new way for Planet Fitness to earn money. According to CNN, “Planet Fitness will raise the price of its ‘classic’ membership from $10 a month to $15 for new members beginning in the summer.” This type of membership gives people access to only one location. It has not raised this rate in over two decades.
The stock got a bump after earnings but is still down 11% this year to $55 per share. One reason is that the gym business is so competitive. Additionally, some members also left because of a dispute over a trans-inclusive bathroom policy, which triggered boycotts. (Check out a ranking of millennials’ 15 favorite brands.)
Why should investors believe Planet Fitness has a promising future? It is because of its “pricing power.” Few companies can raise the price of a service by 50% with confidence that it will not erode their customer base, but Planet Fitness clearly believes it can.
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