Planet Fitness, Inc. (PLNT) is using a strategy that nails today’s consumer trends. The average monthly gym membership is approximately $50 per month. At Planet Fitness, a standard membership is $10 per month. Do you remember when discount big-box retailers stole tremendous market share from traditional retailers thanks to lower prices (and everything under one roof)? Also think about off-price retailers, which are currently dominating in the brick-and-mortar retail space. If a company can find a way to offer lower prices while remaining profitable, it's going to be a threat regardless of the industry.

Today’s consumer is both health and cost conscious. Enter Planet Fitness. Planet Fitness also has a unique angle, which is a “judgement-free zone.” People who want to stay fit are often intimidated by gyms. They don’t want to enter a gym and be stared down by a muscle head, embarrass themselves by using the equipment incorrectly or look like a wimp by not lifting much weight. At Planet Fitness, a large portion of the members are first time gym members, which leads to a friendly and comfortable atmosphere. (For more, read: 5 Things to Know About Planet Fitness Stock.)

On the surface, the above paragraph might not seem to have much investment impact, but nothing could be further from the truth. Investing is really about human nature. If you follow the companies that make humans happy, then you should be happy as an investor. There are no guarantees (ever), but the best you can do is go with what’s working in today’s world.

Healthy Stock

Planet Fitness is working in today’s world. Second-quarter revenue shot 16% higher year over year to $91.5 million, with adjusted earnings-per-share (EPS) coming in at $0.17. Both the top line and bottom line beat expectations. Planet Fitness generates revenue in three ways: membership fees, royalty fees and equipment sales. Comps increased an impressive 7.6% year over year. Not only is that difficult to find in any industry these days, but this also beat the 6.8% increase in the first quarter.

Looking ahead, fiscal year 2016 revenue is now expected to come in at $366-$372 million versus a previous expectation of $360-$370 million. EPS is expected to come in at $0.63-$0.66 versus a previous expectation of $0.62-$0.65. Furthermore, comps are expected to be in the high single digits versus a previous expectation of mid single digits.

Planet Fitness is in line with consumer trends. By offering discounted prices and a non-intimidating environment, it’s likely to continue to steal market share from traditional gyms. (For more, see: Soul Cycle vs. Planet Fitness.)

Dan Moskowitz does not have any positions in PLNT.

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