Planet Fitness admitted it suffered a “fairly significant” drop in membership sign-ups after one of its gyms unleashed a media firestorm by allowing a transgender customer to shave in the women’s locker room.
Executives slashed its forecasts for sales and profits on Thursday, blaming the March 11 incident at a Planet Fitness in Fairbanks, Alaska that went viral after outraged member Patricia Silva posted a video about confronting the transgender customer.
“The first part of March was pretty good,” Chief Financial Officer Tom Fitzgerald said Thursday after release of weaker-than-expected first-quarter revenue.
“And then once social media sort of blew up over our policy issue, we definitely saw a change in the results in the back half of March. Joins and cancels were fairly significantly affected.”
The company ended the quarter with 19.6 million members — an 8% increase from a year ago that missed internal expectations, according to DA Davidson analyst Linda Bolton Weiser. The company also saw a double-digit drop in traffic to its website, Bolton Weiser said in a research note.
Planet Fitness said it now expects this year’s revenue to rise by 4% to 6%, compared with its previous estimate of a 6% to 7%. It forecast that profits will be up between 7% and 9%, compared with its previous estimate of a 10% to 11% increase.
Craig Benson — interim chief executive at the nation’s largest gym chain, which operates 2,500 locations — echoed his financial chief.
“Media mentions relating to the incident peaked in the middle of March, which we believe contributes to some of the softness we saw in joins for the balance of the month as well as some increase in cancels,” Benson said.
He added: ”The good news is we’ve seen the joins rebound, but cancels have remained elevated.”
Silva unleashed the backlash after snapping a photo of the transgender customer in the women’s locker room. Later, she posted a video in which she said that while the transgender customer was shaving a young girl sat on a bench with a towel wrapped around her and looked uneasy or “frightened.”
In response, Planet Fitness revoked Silva’s membership the next day for violating the gym’s policy of taking photos inside the gym. Meanwhile, the company assigned an employee to accompany the transgender customer to the women’s locker room.
The company’s decade-old policy allows members and guests to use the facilities that “best align with their sincere, self-reported gender identity,” the company said.
The decision sparked an outcry around the country, with the company reportedly getting dozens of bomb threats nationwide. The company’s market value plunged by more than $400 million amid boycott calls.
Benson said on Thursday that its policy is not dissimilar from other gyms, including the YMCA.
The company, famous for its inexpensive $10 membership fees, also said it’s raising pricing to $15 for new members beginning in the summer — the first hike since 1998.
“It will take some time for the benefit of the price change to expand our store level margins as the price increase will only be on new classic card memberships,” said Fitzgerald, who is retiring in August.
Next month, Colleen Keating, who had required employees to undergo “unconscious bias training” and supported “hiring through a DEI lens” at her previous company, will replace Benson as the new CEO.
In September, longtime CEO Chris Rondreau was unexpectedly ousted. In February, he left the board as the company slashed 9% of its workforce.
