Planet Fitness CEO Chris Rondeau Ousted, Shares Plummet
In a surprising move that sent shockwaves through both the investment community and the fitness industry, Planet Fitness announced the removal of long-time CEO Chris Rondeau from his position. This abrupt change in leadership caused the company's stock to close nearly 16% lower and hit a 52-week low.
Planet Fitness stated that it is currently in the process of searching for a new CEO, considering candidates from within and outside the organization. In the interim, Craig Benson, a former governor of New Hampshire and a member of Planet Fitness's board, will step in as the temporary CEO. Benson is a franchisee of both Planet Fitness and Dunkin' Donuts and has been a member of Planet Fitness's board for six years.
The sudden departure of Chris Rondeau has left many puzzled, as it's unclear what prompted this decision, especially following a strong second-quarter earnings report just last month. Some close to Rondeau reportedly learned about his departure at the same time it was publicly announced, leaving them stunned.
William Blair analyst Sharon Zackfia described the news as "abrupt" and suggested it didn't seem "planned," noting that the company canceled two scheduled investor conference presentations this week. According to Zackfia, the decision to replace Rondeau was characterized as the board's decision rather than Rondeau's choice.
Planet Fitness Chairman Stephen Spinelli Jr. stated in a press release that the board believed it was the right time for a leadership transition and emphasized the company's commitment to enhancing its competitive advantage and delivering shareholder value.
Rondeau, who has been with Planet Fitness for nearly 30 years, started as a front desk employee at the company's first location in Dover, New Hampshire, owned by founders Michael and Marc Grondahl. He has served as CEO since 2013 and previously held the role of chief operating officer. Despite stepping down as CEO, Rondeau will continue as a board member and provide advisory support during the transition.
Under Rondeau's leadership, Planet Fitness experienced significant growth, including tripling its club base from about 700 to approximately 2,400 locations. The company's annual revenue has risen from around $200 million when he took over as CEO to an estimated $1 billion this year.
While Planet Fitness has reported strong sales and profit growth, concerns have emerged among investors regarding the company's equipment plans and expansion into new franchises, both essential revenue drivers. In August, Rondeau announced a reduction in the 2023 outlook for equipment placements in new franchisee stores, citing higher construction costs and increased interest rates as reasons for the adjustment.
The company had initially aimed to open 600 new stores by 2025, but it's uncertain whether this goal can still be achieved within the original timeframe due to the challenges posed by construction costs.
As Planet Fitness navigates this leadership transition, the fitness industry and investment community will be closely watching for further developments and the company's future direction.