Xponential denies short-seller's allegations, says franchisee economics 'strong'

Xponential Fitness

28/06/2023 14:51

June 28 (Reuters) - Xponential Fitness  XPOF.N  on
Wednesday denied allegations made by Fuzzy Panda Research that
the fitness chain was hiding losses at its brands and stores,
saying the short-seller's report was "misleading" and contained
"inaccurate information". 
    In a report made public on Tuesday, Fuzzy Panda said
Xponential had misled investors and that more than 50% of the
company's fitness studios did not make a positive financial
return, while eight out of 10 brands were losing money monthly.
    The report also said CEO Anthony Geisler had made "false
claims" that Xponential had never closed a store.
    Shares of Xponential, which closed more than 37% lower after
the report on Tuesday to log their biggest one-day percentage
decline, were up about 17% at $18.37 in early trading on
Wednesday.     
    Xponential said while it relocates underperforming studios
to other franchisees, which may result in temporary store
closures during that period, those outlets represented an
"immaterial number" across its store network.
    The company also said it has, in limited cases, repurchased
some underperforming studios from franchisees, which accounts
for a "very small number" of its overall system. It added
franchisee unit economics were also strong, with an estimated
25%-30% operating margin and 40% cash-on-cash return.
    The Fuzzy Panda report "seems like a stretch" and is
"nothing  more  than  speculation," Jefferies analyst Randal
Konik wrote in a note, adding the brokerage was confident in
Xponential's ability to generate healthy results.    
    
    

 (Reporting by Deborah Sophia in Bengaluru; Editing by Krishna
Chandra Eluri)
 ((DeborahMary.Sophia@thomsonreuters.com;))