Planet Health shares sink after board ousts CEO in surprising move

In a move that surprised buyers and staff alike, Planet Health ousted firm veteran Chris Rondeau from his publish as CEO, the workout chain stated Friday in a press release.

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

Planet Fitness stated it is looking for its next chief each internally and externally. Craig Benson, a former governor of New Hampshire and a member of the corporate’s board, will function the interim CEO. He is a franchisee of each Planet Fitness and Dunkin’ Donuts and has been on Planet’s board for six years.

Rondeau’s departure seems sudden, and it isn’t clear what triggered the decision, particularly after a stronger-than-anticipated second-quarter earnings report final month. Some employees close to Rondeau discovered about his departure around the time the information was introduced publicly, leaving them shocked, in accordance with a person acquainted with the matter. The individual spoke on the condition of anonymity as a result of they are not approved to speak on the matter publicly.

In a analysis notice, William Blair analyst Sharon Zackfia referred to as the information “abrupt” and stated it didn’t “seem deliberate” as a result of the corporate canceled two scheduled investor conference shows this week.

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

Planet Health Chairman Stephen Spinelli Jr. stated in a press release that the board “felt that now was the proper time to transition leadership.”

“In in the present day’s evolving surroundings, Planet Fitness is constant to reinforce our aggressive advantage, capitalize on our measurement and scale, and drive additional shareholder worth,” he added.

Planet Fitness declined further remark. Rondeau could not be reached.

Rondeau is a longtime veteran of the corporate, working his approach up from a entrance desk position almost 30 years in the past on the health club’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 position of chief working officer. He’ll proceed as a member as of the board of directors and will stay on in an advisory position “to help ensure a clean transition,” the company stated.

“My 30-yr career at Planet Health has been an unimaginable experience, and it’s been an honor to steer this Company and serve our staff, franchisees and members, all of whom have performed a key position in our super progress and success,” Rondeau stated in a press release. “I am grateful for and look ahead to supporting the administration workforce in an advisory capability, and believe within the long-term potential of Planet Fitness.”

Throughout his time as CEO, Rondeau led Planet Fitness’ IPO and tripled its membership base from about seven hundred to about 2,four hundred places. When he began in the place, the company was doing about $200 million in annual income and is now projected to do greater than $1 billion this yr, Zackfia stated.

Whereas the company lately posted robust gross sales and revenue progress, buyers have grown cautious over its plans for gear and new franchises, that are each key revenue drivers for the business.

In August, Rondeau introduced that Planet Fitness was decreasing its 2023 outlook for placements of kit in new franchisee shops to about one hundred forty, down from a previous vary of one hundred sixty. Planet makes a few quarter of its revenue from promoting its branded fitness gear to franchisees.

At the time, Rondeau chalked up the trimmed forecast to “larger new retailer development prices and elevated interest rates.”

During a call with analysts, finance chief Thomas Fitzgerald noted the company’s plans to open 600 new stores by 2025 might not be attainable. He stated the aim was nonetheless “achievable within the relative close to term” however it might take longer than three years.

“While our new store returns are still robust, they don’t seem to be again to their pre-Covid ranges due primarily to larger development costs which have stubbornly remained up 25%,” Fitzgerald stated at the time.

“To put it in perspective, the amount of CapEx required to construct six stores per yr in 2019 will now solely build 4 or 5 depending on the state of affairs. … Additionally, the speedy improve in interest rates over the past yr has had a cumulative influence on our franchisees’ potential to spend money on new store progress.”

Further, emptiness charges for 15,000- to 25,000-square-foot places which might be suitable for Planet Fitness’ gyms are down about 16% compared with pre-Covid ranges, making it more durable for the corporate to secure new leases, Fitzgerald stated.

Throughout its most up-to-date quarter ended June 30, Planet opened 26 new stores compared with 34 within the yr ago period.

“[Planet Fitness] has introduced multiple the reason why franchise unit openings have slowed, without giving buyers confidence about what the expansion price is more likely to be, which we expect is the important thing factor that has impacted inventory performance,” DA Davidson wrote in a research observe Friday.

The corporate’s stock is down about 36% this yr, giving it a market value of about $four.4 billion.