Shares of F45 Training Holdings (FXLV -61.54%) got clobbered Wednesday after the fitness club chain announced that its president, CEO, and chairman was stepping down from all of those roles, it was laying off staff, and it drastically slashed its guidance for the year.
As a result, the stock finished the day down 61.7%.
F45, which is the fastest-growing fitness franchisor in the world according to Entrepreneur, announced several strategic updates in response to weakening macroeconomic conditions.
First, founder and CEO Adam Gilchrist stepped down, though no permanent successor was named. Gilchrist will remain on the board of directors, but the board will name a new chairman. Independent Director Ben Coates will serve as interim CEO until a permanent CEO is named. Even before Wednesday’s plunge, the stock had fallen sharply since it went public last year, so Gilchrist’s exit should not come as a big surprise.
Additionally, F45 said that it would lay off 110 employees, which will reduce its selling, general, and administrative expenses by between $15 million and $20 million per quarter, or 40% to 50% from their first-quarter levels.
“We are taking the necessary steps to right-size our business in light of shifting macroeconomic and business conditions,” Chief Financial Officer Chris Payne explained. “While we expect growth to continue, market dynamics are having a greater than expected impact on the ability of franchisees to obtain capital to develop new F45 locations. In addition, recent share price performance has made it challenging for franchisees to utilize financing facilities announced earlier this year.”
The company also cut its guidance in part because franchise financing facilities amounting to $250 million were no longer available. The company now expects to sell 350 to 450 new franchises this year, down from an earlier forecast of 1,500. It also cut its revenue forecast from a $255 million to $275 million range to a $120 million to $130 million range, and it slashed its adjusted EBITDA guidance from a $90 million to $100 million range to a $25 million to $30 million range.
Either F45’s earlier guidance was unrealistic or it’s getting hit hard by the macroeconomic climate, including its own stock’s decline. Given that the fitness company’s rapid growth is slowing sharply and its strategy is in disarray, it’s not surprising that the stock plunged Wednesday.