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Planet Fitness Sees Opportunity In Retail Vacancies

Even as some retail businesses shutter their doors, other brands see expansion in their future in some of the spaces left vacant. Planet Fitness, for one, is ramping up its growth, and many of its new locations are likely to occupy recent vacancies — and help replace missing anchors and drive traffic.

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Early this year, Planet Fitness CEO Christopher Rondeau told Jim Cramer on CNBC that the closing of stores like Sears and Kmart sites is "perfect for us. We drive traffic. There are 5,000 workouts per week per store, many Monday, Tuesday and Wednesdays. We drive traffic and we can't be Amazoned."

The growth of Planet Fitness in previously traditional retail space is part of a larger shift in retail. 

"In the future, retail-based real estate will be environments where people gather to engage with friends, connect with like-minded shoppers, seek out unique experiences, reaffirm values and interactively relate to brands on a personal level," A.T. Kearney partner Michael Brown said. Brown is author of the A.T. Kearney Future of Shopping Centers Study.

Boutique fitness is expanding rapidly. For example, Brooklyn, New York-based Tough Mudder Bootcamp is eyeing entry into Atlanta's retail fitness market with up to 30 locations, while SoCal-based Row House, which focuses on rowing, plans to open nine San Francisco locations by 2019 as part of its national expansion. Other expanding fitness companies include SoulCycle, CycleBar, Earth Treks Planet Granite and TITLE Boxing.

Sustaining Planet Fitness' growth is membership growth. During the company's most recent quarterly conference call early in August, Rondeau noted that membership is now 12.1 million, up from about 10.4 million a year ago. 

"Consumers' passion for what we offer in addition to our well-capitalized franchisees continues to fuel growth in both new and existing markets," Rondeau said. "We opened a total of 44 new franchise locations in Q2, ending the quarter with 1,608 stores in the U.S., Puerto Rico, Canada, Dominican Republic, Panama and, most recently, Mexico."

Between 2013 and 2017, the company added an average of 187 new locations each year. Since Planet Fitness was founded in the early 1990s, it has only closed 22 sites.

According to Planet Fitness Chief Financial Officer Dorvin Lively, many of the brand's new locations will be in shopping centers.

"With franchisees, boots on the ground [and] our real estate people in the field, we know where new shopping centers may be being redeveloped or built. ... We and the franchisees are working to find that next particular location," Lively said during the conference call.

More recently, Lively told the Wall Street Journal that “it seems as other retailers close down, it opens up perfect locations for us.”

“[Planet Fitness] can open 200 locations a year for the foreseeable future,” Michael Kawamoto, a research analyst for D.A. Davidson, told the WSJ.