Planet Fitness (NYSE:PLNT), a top-tier fitness chain, witnessed a sharp 16% decline in its share value last week, following the abrupt resignation of CEO Chris Rondeau. In the wake of this sudden leadership shift, the company has named an interim CEO.
In reaction to these developments, Jefferies analysts led by Randal Konik have revised their outlook on Planet Fitness' stock. They downgraded their rating from Buy to Hold and lowered the price target from $90 to $56 on Monday. The report suggests that a combination of factors, including the unexpected change in leadership, could potentially hinder the company's future growth.
Rondeau played a pivotal role in Planet Fitness' geographical expansion efforts by establishing and maintaining strong relationships with franchisees throughout his tenure. His exit could potentially impact these relationships, particularly in the current inflationary climate affecting labor costs, wages, construction expenses, and rising interest rates.
The management of Planet Fitness has recognized that the cost of building a new gym has risen by about 25% since the onset of the pandemic. Jefferies analysts emphasized this point in their report, suggesting that these financial hurdles are leading franchisees to pause their development plans or start using contractual grace periods. As a result, Jefferies has significantly reduced its forecast for new store openings in the upcoming years.
As of Monday's premarket trading session, Planet Fitness' shares were trading at $49.70, marking a further 1.2% decrease. The company's stock has experienced a significant decline of 36% so far this year.
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