Planet Fitness shares sink after board ousts CEO in shocking move

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Chris Rondeau, CEO of Planet Fitness

Adam Jeffery | CNBC

In a move that stunned investors and employees alike, Planet Fitness ousted company veteran Chris Rondeau from his post as CEO, the workout chain said Friday in a press release.

Shares closed nearly 16% lower in the wake of the announcement, hitting a 52 week low.

Planet Fitness said it is searching for its next chief both internally and externally. Craig Benson, former governor of New Hampshire, and member of the board of the company, will be the interim CEO. He’s a franchisee of both Planet Fitness and Dunkin’ Donuts and has been on Planet’s board for six years.

Rondeau’s departure appears sudden, and it’s not clear what triggered the decision, especially after a stronger-than-expected second-quarter earnings report last month. A person with knowledge of the situation said that Rondeau’s departure was revealed to some staff around the same time as the public announcement. They were shocked. The decision was made by the board, not Rondeau,” Zackfia wrote. “

In today’s changing environment, Planet Fitness continues to enhance its competitive advantage, capitalize our size and scale and drive further shareholder values,” he said. Rondeau couldn’t be reached.

Rondeau is a longtime veteran of the company, working his way up from a front desk position nearly 30 years ago at the gym’s first location in Dover, New Hampshire, when it was owned by founders Michael and Marc Grondahl. Rondeau was CEO from 2013 to 2015 and held the position of chief operating office. Rondeau’s 30-year career with Planet Fitness was an incredible journey. It has been a privilege to serve as the Company’s leader and work alongside our franchisees, employees and members. They have all played a crucial role in our growth and success,” Rondeau stated in a press release. “I’m grateful and I look forward to advising the management team, and have faith in the long-term prospects of Planet Fitness. Zackfia said that when he first took on the role, Planet Fitness was doing about $200 million in annual revenue. This year it is expected to do more than $1 billion. When he started in the position, the company was doing about $200 million in annual revenue and is now projected to do more than $1 billion this year, Zackfia said.

Scaled-back goals

Planet Fitness CEO Chris Rondeau at the New York Stock Exchange, May 17, 2022.

Source: NYSE

While the company recently posted strong sales and profit growth, investors have grown wary over its plans for equipment and new franchises, which are both key revenue drivers for the business.

In August, Rondeau announced that Planet Fitness was reducing its 2023 outlook for placements of equipment in new franchisee stores to about 140, down from a previous range of 160. Planet makes about a quarter of its revenue from selling its branded fitness equipment to franchisees.

At the time, Rondeau chalked up the trimmed forecast to “higher new store construction costs and increased interest rates. Thomas Fitzgerald, the finance chief at Planet Fitness, said that opening 600 new stores in 2025 might not be feasible. Fitzgerald stated that while the returns on new stores are still good, they have not returned to the levels of pre-Covid due to the stubbornly high construction costs, which are up by 25%. The rapid rise in interest rates has also had an impact on the ability of our franchisees to invest in the growth of new stores. “

Further, vacancy rates for 15,000- to 25,000-square-foot locations that are suitable for Planet Fitness’ gyms are down about 16% compared with pre-Covid levels, making it harder for the company to secure new leases, Fitzgerald said.

During its most recent quarter ended June 30, Planet opened 26 new stores compared with 34 in the year ago period.

has presented multiple reasons why franchise unit openings have slowed, without giving investors confidence about what the growth rate is likely to be, which we think is the key factor that has impacted stock performance,” DA Davidson wrote in a research note Friday.

The company’s stock is down about 36% this year, giving it a market value of about $4.4 billion.