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What the disappointing Planet Fitness IPO means for SoulCycle

After the Thursday market debut of Planet Fitness, there are now two publicly traded fitness operators in the U.S. A third, SoulCycle, is due to IPO some time later this year.

But what does the roughly 4% drop in shares of Planet Fitness mean for SoulCycle’s coming IPO? Even though the companies operate different fitness business models, some observers see a tea leaf reading opportunity in the performance of the Planet Fitness IPO.

“Though they have different businesses and models, investor enthusiasm for SoulCycle could be tempered by the poor reception of Planet Fitness today,” said Matthew Kennedy, an analyst at IPO ETF manager Renaissance Capital.

IPOs from fitness companies have had a pretty dismal showing on their first day of trading. Shares were up less than 5% each on the first day of trading for New York Sports Club operator Town Sports International (CLUB) and private golf club operator ClubCorp Holdings (MYCC), according to market data provider Ipreo. Life Time Fitness had a better performing IPO with a 13.5% first-day gain, but even that isn’t a ringing endorsement of the sector.

Kennedy says that Planet Fitness could have been the victim of poor timing on Thursday. The IPO market hasn’t done well the past few weeks. Consumer-focused companies in particular haven’t performed well in the market, even though similar IPOs posted stronger first-day gains earlier in the year. When SoulCycle goes public, and the soonest that could occur would be after Labor Day, the IPO market may be in a better place.

Then again, comparing Planet Fitness to SoulCycle feels like weighing the value of Kohl’s (KSS) against that of Neiman Marcus. Sure, they are both department store retailers, but Neiman Marcus courts luxury shoppers while Kohl’s sells to, well, just about anyone.

SoulCycle is the “Neiman Marcus” of the fitness world. It charges as much as $34 for a 45-minute spin class, with additional fees for shoe rentals and water bottles. SoulCycle generates $112 million in annual sales and is highly profitable, but in many ways, it comes off as a fitness fad. Other studio-focused concepts are popping up in New York and other major American cities, giving athletes an opportunity to try boxing, ballet, and intense treadmill running. All for a high price.

Planet Fitness is in a different league. The gym charges members as little as $10 per month for a membership, saying it wants to cultivate a “welcoming, non-intimidating environment,” which it calls a “Judgment Free Zone.” The purple and yellow fitness centers target as broad an audience as possible, mentioning in filings with the Securities and Exchange Commission that it aims to lure occasional gym users, pointing out about 80% of the U.S. and Canadian populations over the age of 14 is not a member of a gym.

SoulCycle considers itself a movement or, as some would argue, a cult. The company says its instructors lead riders on an “emotional journey that runs parallel to the physical workout.”

Like SoulCycle, Planet Fitness is profitable. Planet Fitness generates higher sales, with 2014’s total of $279.8 million outpacing the $112 million SoulCycle booked. However, sales growth is faster at SoulCycle.

So why compare the two at all? Well, there aren’t many other competitors on the market today.

“Planet Fitness is a fast growing and high-margin player in a space that has largely atrophied,” said Kennedy.

Planet Fitness has just over 1,000 locations today and according to Chief Executive Chris Rondeau, there are commitments in place to double the size over time. Margins are being boosted at those locations as Planet Fitness adds new members. The average stands at around 6,600 members at each club, up from 5,800 a few years ago. And because most Planet Fitness members are casual users that only use the facilities a few times a week, costs are low.

“We do so many things differently,” Rondeau told Fortune. “We are a gym chain that gives away free pizza on the first Monday of every month.”

The only other publicly traded fitness center company is Town Sports. The owner of New York Sports Club gyms has seen shares slump 60% this year, and the company’s market capitalization is a paltry $61 million.

Others have succumbed to bankruptcy or acquisitions. Bally Total Fitness is a notable failure in the space. At one point it was a public company, but as a result of a high debt burden, it landed in bankruptcy twice and eventually sold many of its locations to 24 Hour Fitness. Only three Bally-branded fitness centers exist today. They are all in Manhattan.

Life Time Fitness investors had an easier ride. The company was sold earlier this year for more than $4 billion to a pair of private equity firms. The price of $72.10 per share was higher than the value of Life Time Fitness shares in the almost 11 years the company spent on the public market.