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 within the wake of the announcement, hitting a 52 week low.
Planet Fitness said it’s trying to find its next chief each internally and externally. Craig Benson, a former governor of Latest Hampshire and a member of the corporate’s board, will serve because the interim CEO. He’s a franchisee of each Planet Fitness and Dunkin’ Donuts and has been on Planet’s board for six years.
Rondeau’s departure appears sudden, and it is not clear what triggered the choice, especially after a stronger-than-expected second-quarter earnings report last month. Some staff near Rondeau learned about his departure across the time the news was announced publicly, leaving them shocked, in line with an individual acquainted with the matter. The person spoke on the condition of anonymity because they are not authorized to talk on the matter publicly.
In a research note, William Blair analyst Sharon Zackfia called the news “abrupt” and said it didn’t “appear planned” because the corporate canceled two scheduled investor conference presentations this week.
“The choice was characterised because the board’s and never Rondeau’s,” Zackfia wrote.
Planet Fitness Chairman Stephen Spinelli Jr. said in a press release that the board “felt that now was the proper time to transition leadership.”
“In today’s evolving environment, Planet Fitness is continuous to boost our competitive advantage, capitalize on our size and scale, and drive further shareholder value,” he added.
Planet Fitness declined further comment. Rondeau couldn’t be reached.
Rondeau is a longtime veteran of the corporate, working his way up from a front desk position nearly 30 years ago on the gym’s first location in Dover, Latest Hampshire, when it was owned by founders Michael and Marc Grondahl. Rondeau has served as CEO since 2013 and previously held the role of chief operating officer. He’ll proceed as a member as of the board of directors and can stay on in an advisory role “to assist ensure a smooth transition,” the corporate said.
“My 30-year profession at Planet Fitness has been an incredible ride, and it has been an honor to guide this Company and serve our employees, franchisees and members, all of whom have played a key role in our tremendous growth and success,” Rondeau said in a press release. “I’m grateful for and sit up for supporting the management team in an advisory capability, and trust within the long-term potential of Planet Fitness.”
During his time as CEO, Rondeau led Planet Fitness’ IPO and tripled its club base from about 700 to about 2,400 locations. When he began within the position, the corporate was doing about $200 million in annual revenue and is now projected to do greater than $1 billion this yr, Zackfia said.
Scaled-back goals
Planet Fitness CEO Chris Rondeau on the Latest York Stock Exchange, May 17, 2022.
Source: NYSE
While the corporate recently posted strong sales and profit growth, investors have grown wary over its plans for equipment and latest franchises, that are each key revenue drivers for the business.
In August, Rondeau announced that Planet Fitness was reducing its 2023 outlook for placements of kit in latest franchisee stores to about 140, down from a previous range of 160. Planet makes a few quarter of its revenue from selling its branded fitness equipment to franchisees.
On the time, Rondeau chalked up the trimmed forecast to “higher latest store construction costs and increased rates of interest.”
During a call with analysts, finance chief Thomas Fitzgerald noted the corporate’s plans to open 600 latest stores by 2025 may now not be possible. He said the goal was still “achievable within the relative near term” nevertheless it may take longer than three years.
“While our latest store returns are still strong, they should not back to their pre-Covid levels due primarily to higher construction costs which have stubbornly remained up 25%,” Fitzgerald said on the time.
“To place it in perspective, the quantity of CapEx required to construct six stores per yr in 2019 will now only construct 4 or five depending on the situation. … Moreover, the rapid increase in rates of interest over the past yr has had a cumulative impact on our franchisees’ ability to take a position in latest store growth.”
Further, emptiness rates for 15,000- to 25,000-square-foot locations which are suitable for Planet Fitness’ gyms are down about 16% compared with pre-Covid levels, making it harder for the corporate to secure latest leases, Fitzgerald said.
During its most up-to-date quarter ended June 30, Planet opened 26 latest stores compared with 34 within the yr ago period.
“[Planet Fitness] has presented multiple the reason why franchise unit openings have slowed, without giving investors confidence about what the expansion rate is prone to be, which we expect is the important thing factor that has impacted stock performance,” DA Davidson wrote in a research note Friday.
The corporate’s stock is down about 36% this yr, giving it a market value of about $4.4 billion.