New Year’s Eve has an interesting effect on São Paulo’s parks. The pledge to start the new year healthier has hordes of amateur athletes trying out walking and running in a laudable new effort. At gyms, it’s peak enrollment season.
Who seems to have bet that the new athletes will continue in the fitness life is the giant with the yellow sign, . The brand has just announced that, in 2024, it added 305 gyms to its network – an expansion of 21%. Thus, 2025 begins with 1,743 units, 823 in Brazil, 395 in Mexico and 525 in other Latin American countries.
This type of movement is expensive. And it takes time to pay off. With the hunger to grow, the company’s gross debt reached the level of R$5.2 billion in the third quarter of 2024 (latest data available). This is 45% more than in the same period last year. Only those who trust that they will make more money with new acquisitions get into debt like this.
The basic recipe for running a gym doesn’t have much magic: new equipment, available units, good subscription packages and trained employees.
Apparently, investors do not believe that this will be enough to transform the increase in debt into increased profits for Smart Fit. The company’s shares, SMFT3, closed the year down almost 35%. , but the Ibovespa losses were much smaller than that, 10.3%.
The collapse of the shares was against the wishes of XP and BTG Pactual analysts. The brokerage’s professionals stated that the latest results reported by the fitness chain were solid, highlighting that the company “seems to be on the right track with its expansion plan”.
The investment bank’s experts pointed out the company’s increased efficiency, which is reflected in the considerable 35% increase in its EBITDA (profits before taxes, depreciation and amortization). They recommend buying the stock, saying that their target price is R$28 – 60% above the current R$17.50.
How can a rapidly expanding brand, well regarded among analysts, lose 35% of its market value in just one year? The network is a great example to explain the dichotomy experienced by Brazilians this year.
We have a government that believes in and preaches increased consumption, but is unable to control , reducing purchasing power and increasing the debt of its citizens.
When the lights go out in 2024, the number of people in debt in Brazil reached 73 million people, according to Serasa. As much as Brazilians are increasingly adept at a healthy way of life, when the callouses tighten, the gym bill is not the first to be paid.
The rise of inflation, which brings with it an increase in interest rates, not only hinders the attraction and retention of customers. Renegotiating debts and property rental contracts is becoming increasingly difficult for the network.
It is worth remembering that, in 2023, when there was a prospect of interest cuts, Smart Fit shares appreciated by around 90%. With the losses from 2024, the shares are sold today for 55% of the price they had when they arrived on the stock exchange in 2021.
It seems that investors want more than New Year’s resolutions to get back to the thesis of healthy living.
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