CHANHASSEN, MN — The frustration in Bahram Akradi's voice was evident during Life Time Fitness' third quarter earnings call last month.
In one respect, things looked positive for Life Time and Akradi, the Chanhassen, MN-based company's CEO. Third quarter revenue grew 7.8 percent to $214.3 million compared to $198.8 million during last year's third quarter. For the first nine months of 2009, revenue grew to $633.3 million from $575.7 million last year at this time.
But the one sticking point for Akradi was Life Time's attrition rate.
“I am extremely disappointed with our 10.6 percent attrition rate that we had in the third quarter,” Akradi told analysts. “Things aren't working at this stage in any shape or form.”
The rate actually was lower than the 11.5 percent attrition rate in third quarter 2008. The trailing 12 months attrition rate fell from 41.5 percent to 40.6 percent. Still, Akradi wants the trailing attrition rate below 36 percent.
Net income for the company was down slightly — $20.6 million in third quarter 2009 compared to $21.6 million at this time last year.
Life Time memberships increased 6 percent to 590,716 as of Sept. 30, from 557,164 at the same time last year. However, Life Time lost about 18,000 members from the previous quarter.
Akradi said that Life Time — and the rest of the club industry — has yet to shake the effects of the struggling economy.
“Business is as tough as I have ever seen it in 20-some years,” Akradi said. “In all the past recessions, I felt no impact in our business. All we had to do was lower the initiation fee, and we got the membership accounts. We were able to pull the people in by doing increased promotions, increased marketing. In this particular time, things are just not working.”