Sat. Sep 30th, 2023

Chris Rondeau, CEO of Planet Health

Adam Jeffery | CNBC

In a transfer that shocked traders and workers alike, Planet Health ousted firm veteran Chris Rondeau from his publish as CEO, the exercise chain stated Friday in a press launch.

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

Planet Health stated it’s trying to find its subsequent 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 Health 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 choice, particularly after a stronger-than-expected second-quarter earnings report final month. Some employees near Rondeau realized about his departure across the time the information was introduced publicly, leaving them shocked, in line with an individual accustomed to the matter. The particular person spoke on the situation of anonymity as a result of they don’t seem to be approved to talk on the matter publicly.

In a analysis be aware, William Blair analyst Sharon Zackfia known as the information “abrupt” and stated it did not “seem deliberate” as a result of the corporate canceled two scheduled investor convention shows this week.

“The choice was characterised because the board’s and never Rondeau’s,” Zackfia wrote.

Planet Health Chairman Stephen Spinelli Jr. stated in a press launch that the board “felt that now was the precise time to transition management.”

“In at this time’s evolving setting, Planet Health is continuous to boost our aggressive benefit, capitalize on our measurement and scale, and drive additional shareholder worth,” he added.

Planet Health declined additional remark. Rondeau could not be reached.

Rondeau is a longtime veteran of the corporate, working his manner up from a entrance desk place practically 30 years in the past on the fitness center’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 beforehand held the function of chief working officer. He’ll proceed as a member as of the board of administrators and can keep on in an advisory function “to assist guarantee a clean transition,” the corporate stated.

“My 30-year profession at Planet Health has been an unbelievable trip, and it has been an honor to steer this Firm and serve our workers, franchisees and members, all of whom have performed a key function in our large development and success,” Rondeau stated in a press release. “I’m grateful for and stay up for supporting the administration group in an advisory capability, and believe within the long-term potential of Planet Health.”

Throughout his time as CEO, Rondeau led Planet Health’ IPO and tripled its membership base from about 700 to about 2,400 areas. When he began within the place, the corporate was doing about $200 million in annual income and is now projected to do greater than $1 billion this yr, Zackfia stated.

Scaled-back targets

Planet Health CEO Chris Rondeau on the New York Inventory Alternate, Might 17, 2022.

Supply: NYSE

Whereas the corporate just lately posted robust gross sales and revenue development, traders have grown cautious over its plans for tools and new franchises, that are each key income drivers for the enterprise.

In August, Rondeau introduced that Planet Health was lowering its 2023 outlook for placements of apparatus in new franchisee shops to about 140, down from a earlier vary of 160. Planet makes a few quarter of its income from promoting its branded health tools to franchisees.

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

Throughout a name with analysts, finance chief Thomas Fitzgerald famous the corporate’s plans to open 600 new shops by 2025 might not be doable. He stated the objective was nonetheless “achievable within the relative close to time period” however it could take longer than three years.

“Whereas our new retailer returns are nonetheless robust, they don’t seem to be again to their pre-Covid ranges due primarily to larger building prices which have stubbornly remained up 25%,” Fitzgerald stated on the time.

“To place it in perspective, the quantity of CapEx required to construct six shops per yr in 2019 will now solely construct 4 or 5 relying on the scenario. … Moreover, the speedy enhance in rates of interest over the previous yr has had a cumulative influence on our franchisees’ skill to spend money on new retailer development.”

Additional, emptiness charges for 15,000- to 25,000-square-foot areas which might be appropriate for Planet Health’ gyms are down about 16% in contrast with pre-Covid ranges, making it tougher for the corporate to safe new leases, Fitzgerald stated.

Throughout its most up-to-date quarter ended June 30, Planet opened 26 new shops in contrast with 34 within the yr in the past interval.

“[Planet Fitness] has introduced a number of the reason why franchise unit openings have slowed, with out giving traders confidence about what the expansion fee is prone to be, which we expect is the important thing issue that has impacted inventory efficiency,” DA Davidson wrote in a analysis be aware Friday.

The corporate’s inventory is down about 36% this yr, giving it a market worth of about $4.4 billion.

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