Life Time Fitness Inc (NYSE:LTM)

CAPS Rating: 2 out of 5

The Company operates distinctive and large sports and athletic, professional fitness, family recreation, resort and spa centers under the LIFE TIME FITNESS brand.

Recs

7
Player Avatar William163264 (61.75) Submitted: 1/7/2013 4:29:19 PM : Underperform Start Price: $49.03 LTM Score: +32.66

Sometimes the best investments are the ones in companies that you have the most personal experience with. I worked for 2 different LTFs on the East Coast, and unfortunately, their strenghts are not in categories that warrant an investment. Great personal trainers, however the leadership and sales departments are only average.

The reason that this presents such a large problem is because, over the past six months, the Metro DC area has been flooded with comparable gyms offering better membership prices. LTF does a "tiered" membership fees, with the more luxurious gyms costing more per month (ie Platinum, Diamond). A platinum member can visit lower tiers (i.e. Gold) however it does not work the other way around. The solution has been to change most Gold gyms to higher tiers, forcing members to pay more for the same gym. Good if you plan on using multiple gyms, bad for everybody else who does not want their membership fees increased (who does?).

Directly after this increase, many memberships were lost to Gyms who charge based on one or two "tiers", namely Xsport Fitness (crowded at nearly all hours, very well managed) and 24hourfitness.

I can't speak for every region, but I know this has been also happening in the Texas area (in addition to DC/Northern VA). Profit will continue to fall for this company, and they have taken out a large amount of debt to expand nationally and saturate highly populated areas. Those areas are now seeing smaller competitors who offer the more diverse gym experience that was once dominated by this company. I believe it will shrink down to a smaller number of gyms and a smaller number of loyal members. A chunk of the market is now going elsewhere and finding a comparable experience at a more affordable prices.

FYI, I Know this is a long pitch, but hopefully it will be read by some investors interested in looking at health clubs. I believe this may be one to stay away from.

Featured Broker Partners


Advertisement