Planet Fitness shares sink after board ousts CEO in shocking move

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,
a
former
governor
of
New
Hampshire
and
a
member
of
the
company’s
board,
will
serve
as
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.
Some
staff
close
to
Rondeau
learned
about
his
departure
around
the
time
the
news
was
announced
publicly,
leaving
them
shocked,
according
to
a
person
familiar
with
the
matter. The
person
spoke
on
the
condition
of
anonymity
because
they’re
not
authorized
to
speak
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
company
canceled
two
scheduled
investor
conference
presentations
this
week.

“The
decision
was
characterized
as
the
board’s
and
not
Rondeau’s,”
Zackfia
wrote.

Planet
Fitness
Chairman
Stephen
Spinelli
Jr.
said
in
a
press
release
that
the
board
“felt
that
now
was
the
right
time
to
transition
leadership.”

“In
today’s
evolving
environment,
Planet
Fitness
is
continuing
to
enhance
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
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
has
served
as
CEO
since
2013
and
previously
held
the
role
of
chief
operating
officer.
He
will
continue
as
a
member
as
of
the
board
of
directors
and
will
stay
on
in
an
advisory
role
“to
help
ensure
a
smooth
transition,”
the
company
said.

“My
30-year
career
at
Planet
Fitness
has
been
an
incredible
ride,
and
it’s
been
an
honor
to
lead
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
statement.
“I
am
grateful
for
and
look
forward
to
supporting
the
management
team
in
an
advisory
capacity,
and
have
confidence
in
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
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.

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.”

During
a
call
with
analysts,
finance
chief
Thomas
Fitzgerald
noted
the
company’s
plans
to
open
600
new
stores
by
2025
may
no
longer
be
possible.
He
said
the
goal
was
still
“achievable
in
the
relative
near
term”
but
it
may
take
longer
than
three
years.

“While
our
new
store
returns
are
still
strong,
they
are
not
back
to
their
pre-Covid
levels
due
primarily
to
higher
construction
costs
that
have
stubbornly
remained
up
25%,”
Fitzgerald
said
at
the
time.

“To
put
it
in
perspective,
the
amount
of
CapEx
required
to
build
six
stores
per
year
in
2019
will
now
only
build
four
or
five
depending
on
the
situation.
…
Additionally,
the
rapid
increase
in
interest
rates
over
the
past
year
has
had
a
cumulative
impact
on
our
franchisees’
ability
to
invest
in
new
store
growth.”

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.

“[Planet
Fitness]
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.