Fitness financials: Bally stock drops to new low after Q2 loss, plus U.S. sales slow in August

Bally stock drops to new low after Q2 loss
Shares in Bally Total Fitness (NYSE: BFT) plunged to an all-time low Sept. 12 after it posted a second-quarter loss due to weaker membership sales and said it is at risk of defaulting on a credit agreement.

Bally stock fell $0.47, or 17 percent, to close at $2.22 on the New York Stock Exchange after sinking as low as $2.17. The company’s stock, which was trading as high as $9.92 in May, has been in a nosedive amid questions about management and failed efforts to sell the company.

Bally reported a $733,000 second-quarter net loss on Sept. 11 after the close of trading, citing weaker membership and lower average selling prices. Revenue slipped 2 percent to $255 million, and the average number of members during the period dipped to 3.6 million from 3.7 million a year ago. The number of overall fitness centers open at the quarter’s end shrank to 383 from 391.

The company said that unless its lenders revise the terms of a credit agreement, it will default on the agreement in April 2007.

Bally held a conference call on Sept. 13 during which interim CEO Don Kornstein said that after being unable to complete a sale or merger on favorable terms, it is focusing on seeking capital.

“The biggest issues facing Bally are its significant debt load and the need to create financial flexibility for its operations,” he said during the call. Despite the current problems, he maintained, “the company remains an important industry player with a solid franchise and opportunities for growth.”

In other company news: Bally promoted Tia Willows to vice president, fitness, nutrition and retail services, from vice president, operations and fitness services. In her expanded role, Willows will oversee all retail operations in addition to her current responsibilities leading the company’s personal training, group exercise and weight loss initiatives. Willows has been with Bally since 1980.

By consolidating the four departments of retail, nutrition, group exercise and personal training under one umbrella, Bally said it expects to better integrate and align the initiatives of each department, which will translate into an even stronger connection between exercise and nutrition for members.

U.S. sales slow in August
U.S. consumers moderated their shopping in August as the price of gas topped more than $3 a gallon. Sales at stores and food establishments in August rose 0.2 percent from July, after jumping 1.4 percent in July from June, the Commerce Department said.

Excluding auto dealers — whose sales in dollar terms rose slightly even though they sold fewer vehicles — the August increase was also 0.2 percent, slightly below economists’ expectations. Further excluding gasoline stations, where a sharp price decline from the early August peak precipitated a drop in the dollar value of sales, retail sales rose 0.4 percent.

The August report contrasted with July’s surprisingly strong data, which had cast doubt on the idea that slowing consumer spending would cool the economy and relieve inflationary pressures. “This shows that the July surge was not a true indication of what is happening,” Joshua Shapiro, chief U.S. economist at consulting firm MFR Inc., told the Wall Street Journal. “The consumer has ratcheted back.”

Consumer spending overall remains on the rise, and some economists see grounds for a resurgence. Taken together, the retail sales figures for July and August are consistent with inflation-adjusted consumer spending growth of about 3.5 percent in the third quarter, up from 2.6 percent in the second quarter.

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