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What Does Planet Fitness IPO Mean for SoulCycle?

Last week’s initial public offering (IPO) calendar included two companies chasing the better health and fitness market. Neither did particularly well on its first day of trading. A third company recently filed for an IPO in the space and is expected to makes it move on the public markets sometime after the Labor Day holiday.

Of last week’s two IPOs, Planet Fitness Inc. (NYSE: PLNT) franchises low-cost gyms, and although the IPO priced at the high end of the expected range, the stock closed its first day of trading exactly at its IPO price of $16.00. Amplify Snack Brands Inc. (NYSE: BETR) priced above its expected range, but closed its first day of trading down 10% from the IPO price.

Planet Fitness claims nearly 1,000 franchise and operated gyms with more than 7 million customers. The company’s $10 per month basic membership was its biggest selling point, and the company has succeeded in getting more than half of its members to enroll for the premium $20 per month membership. Growth has been strong, but analysts and investors are concerned that Planet Fitness has little to set itself apart from competitors except its low price.

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SoulCycle, which filed for an IPO late last month, is an altogether different breed. A 45-minute session on one of the company’s cycling machines costs about three times more than does a whole month’s subscription to Planet Fitness. The target market is different, obviously, and the number of locations is far different. SoulCycle claims just 38 studios (not gyms) in the United States and 300,000 riders.

The big question about SoulCycle is whether it is a fad or a lasting business. From the company’s Form S-1 filing:

Our classes follow a signature format, yet every SoulCycle experience is unique. Produced to engage every single rider, each carefully curated “cardio party” is fueled by the personalities of our instructors, their uniquely crafted musical playlists and the energy of the room. The signature class includes approximately 35–40 minutes of riding, a five to eight minute upper-body strength series using hand weights and a three minute cool-down stretch. During the class, the instructor leads the rider on an emotional journey that runs parallel to the physical workout. We believe the combination of the physical, musical and emotional aspects of the ride leaves riders inspired and connected to both the brand and the community. Based on the impact we’ve had on our riders’ physical and mental well-being, we believe SoulCycle is more than a business, it’s a movement.

In the case of Planet Fitness, its sole differentiator appears to be price, and that is a hard distinction to maintain. Even Wal-Mart has had trouble with that.

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At SoulCycle, a premium experience is difficult for potential competitors to mimic, but the market for premium experiences is relatively limited compared to the market for an inexpensive workouts. That is not to say SoulCycle will not be successful, but any comparison with the Planet Fitness IPO may be one of those apples-to-oranges things.

For the record, around noon on Monday, Planet Fitness stock traded up about 4.2% to $19.02, after posting a post-IPO high of $20.68. That was a gain of nearly 30% to Thursday’s IPO.

By Paul Ausick


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