NEW YORK -- Town Sports International Holdings Inc. (TSI), New York, reported an increase in both fourth quarter and full-year 2008 revenue this week, but much of that increase was due to new club openings.
During fourth quarter 2008, revenue increased 3.4 percent to $122.9 million. For the full year, revenues increased 7.1 percent to $506.7 million, according to TSI, which operates clubs under the name New York Sports Clubs, Boston Sports Clubs, Philadelphia Sports Clubs and Washington Sports Clubs.
When looking at the revenue more closely, TSI’s financials show that revenue at clubs less than two years old grew as these clubs continued to ramp up membership, but revenue at clubs more than two years old fell.
For fourth quarter 2008, revenues increased $9.6 million at the 24 clubs opened or acquired after Dec. 31, 2006. This increase in revenue was offset by decreases in revenue of $4 million at TSI clubs opened or acquired prior to Dec. 31, 2006, and $1.6 million related to the seven clubs that were closed after to Dec. 31, 2006.
Revenue at clubs operated for more than 12 months (comparable club revenue) decreased 1.4 percent during the fourth quarter of 2008, but increased 2.2 percent for the full year. Of the 1.4 percent decrease, 1 percent was due to a decrease in prices and 0.4 percent was due to a decrease in ancillary club revenue and fees and other revenue. There was no change in comparable club membership during the quarter.
Personal training revenues grew 4.3 percent to $14 million during the quarter and 10.1 percent to $61.8 million for the full year.
Membership attrition averaged 3.5 percent per month in the fourth quarter compared to 3 percent in the fourth quarter of 2007. For the year, membership attrition was 40.2 compared to 38.2 percent for the full year 2007.
The fourth quarter results include goodwill impairment charges of $17.6 million and fixed asset impairment charges of $1.9 million.
“We are pleased with the overall resiliency of our business, as demonstrated by the continued growth in revenues in the fourth quarter of 2008 as compared to the fourth quarter of 2007,” says Alex Alimanestianu, chief executive officer of TSI. “In an extremely challenging consumer spending environment, we generated operating cash flow of $18.7 million and $95.6 million in the fourth quarter and year ended Dec. 31, 2008, respectively.”
The company had increases in total member usage from the fourth quarter of 2008 as compared to the fourth quarter of 2007, which Alimanestianu says shows the continued strong demand for the services offered at TSI.
However, he says that TSI faces ongoing challenges to its efforts to grow net memberships, and he expects those challenges to continue throughout 2009.
“As a result, we are reducing operating expenses and capital expenditures in an effort to protect our margins and preserve liquidity,” he says, adding that the company is slowing its new club openings to four in 2009. “On the operations front, we are seeing clear and positive signs that our ongoing initiatives to enhance the experience in our clubs are starting to produce favorable member feedback and overall satisfaction."
TSI also announced that in late February, Jason Fish assumed the role of chairman of the board of directors, replacing Paul Arnold, who will remain as a director.