Planet Fitness (NYSE: PLNT) has taken the spread of the coronavirus seriously by closing its roughly 2,000 company-owned and franchised gyms since March. It has also boosted liquidity by drawing down on its revolving credit facility and ceasing share repurchase activity. The senior management team agreed to pay cuts with CEO Christopher Rondeau forgoing his entire salary and other executives seeing partial reductions. Members of the board of directors similarly gave up their cash retainer fees.
In this environment, it is not surprising that management joined other companies in withdrawing 2020 guidance. There are signs that social distancing is having the desired effect and reducing the rate of infections, but certain government officials are warning that cities and states will not reopen all at once to prevent a renewed outbreak. With the decision up to each state, Georgia recently announced certain businesses, including gyms, are allowed to reopen by the end of the week. Planet Fitness has 65 clubs in the state, but it is unclear if it will reopen them.
Other states like California (140 clubs) and New York (90 clubs) are pledging a go-slow approach. This means Planet Fitness is likely in for tough sledding for some time, but it has a sustainable business that should recover quickly once the worst of the health crisis passes, even in a tough economy.