The retrenchment of a major sporting goods retailer may fuel the growth of a fast-expanding discount gym chain.
"We have already got the list of stores [up for sale] from Sports Authority, so we are looking at some of those and any other retailers that are downsizing or closing," Planet Fitness (PLNT) CEO Chris Rondeau told TheStreet. "A lot of the real estate investment trusts (REITS) are calling us and asking if we are interested -- it's definitely an opportunity for us."
Sports Authority has for years contended with intense competition from Dick's Sporting Goods (DKS) and Amazon (AMZN) , and finally filed a Chapter 11 bankruptcy petition this week. As part of the reorganization, Sports Authority laid out plans to close or sell 140 of its 464 stores in the U.S. and Puerto Rico, in addition to distribution centers and warehouses in Denver and Chicago.
The store closings could provide a lucrative opportunity to fuel even quicker growth for Planet Fitness, which has through the years opened gyms in former sites operated by Office Depot (ODP) and other big-box retailers that have closed locations to save money.
Planet Fitness opened a whopping 209 new gyms in 2015, above its guidance for an additional 195 to 200. This year, it anticipates opening 210 to 220 gyms, 15 of which are planned for Canada. It's a number that could go higher given the chance to purchase failed Sports Authority sites.
Planet Fitness believes over time it could reach 4,000 locations, up from about 1,100 today.
Explaining why closed retail sites are so attractive to take over, Rondeau said "these are big boxes, they are open concepts in most cases, and have plenty of parking."
A typical Planet Fitness is about 20,000 square feet, compared to 38,000 square feet on average for a Neighborhood Market and 40,000 square for a Sports Authority.
New store openings are only one component fueling Planet Fitness' growth. The other? More people just want to work out on the cheap each month.
On Thursday evening, Planet Fitness reported fourth quarter same-store sales surged 6.2%. Adjusted earnings came in at 17 cents a share, up 24% year over year, and above Wall Street forecasts for 15 cents a share. For 2016, Planet Fitness projects revenue of $355 to $365 million, and adjusted earnings of 60 cents to 63 cents a share. Wall Street had projected $350 million in revenue and earnings of 59 cents a share.
Judging by Planet Fitness's solid sales in the second half of 2015 (same-store sales rose 6.9% in the third quarter), it has not felt an impact from Town Sports International's (CLUB) move last year to drop prices to attract new members.
On May 31, the majority of Town Sport's locations, which include New York Sports Club and Boston Sports Club, switched to a new pricing model where month-to-month memberships (no annual commitment) start at $19.95 per month, plus an initiation fee. That initiation fee varies by location, and could range as high as $250 for those in Manhattan.
Previously, a membership to a Town Sports gym would cost north of $50 a month depending on the location and plan. By contrast, Planet Fitness charges $10 a month for a basic membership, while the $19.99-a-month Planet Fitness "black card" offers perks such as free tanning and the option to bring a guest free of charge.
Said Rondeau, "We disrupted the market, and left the market no choice but to lower their prices -- at Town Sports they dropped the prices, but I don't think it has been as easy as they thought."