Smart Fit Expands Latin American Fitness Dominance Despite Margin Pressures

Brazilian gym chain Smart Fit reported robust first-quarter growth, with net revenue hitting R$1.7 billion ($283 million), a 33% annual surge driven by membership gains and pricing strategies.

The results, disclosed in Thursday’s earnings release, outpaced market expectations by 2.5% but revealed regional cost challenges tempering profitability.

The company added 290 gyms over the past year, reaching 1,759 locations across 15 countries-a 20% expansion. Nearly 1,000 units now qualify as mature, contributing to a record 53% gross margin for established sites.

Membership grew 16% to 5.3 million, with Mexico and non-Brazilian South American markets accounting for 56% of total revenue. Brazil retained 2.4 million members despite representing just 1% of its population.

Net income rose 27% to R$140 million ($23 million), though EBITDA of R$520 million ($87 million) fell 10.7% short of forecasts. Operational expenses jumped 36% annually, particularly in Brazil and Mexico, where labor and rental costs squeezed margins.

Smart Fit’s Growth Push Faces Margin Pressures in Mexico

Mexico’s per-gym sales dipped 7% year-over-year despite recent price adjustments, while its EBITDA margin contracted 4.3 percentage points. Smart Fit maintained a R$493 million ($82 million) operating cash flow, funding R$441 million ($74 million) in expansion-focused capex.

Net debt held steady at 1.1x EBITDA, with 95% cash conversion efficiency. The firm plans to open 340–360 new gyms in 2025, accelerating from 305 additions last year. Over 100 locations are under construction, supported by 280 signed leases.

Digital ventures like the Queima Diária fitness app and corporate wellness platform TotalPass gained traction, diversifying revenue streams beyond gym memberships.

Analysts note Smart Fit trades at 19x 2025 price-to-earnings-a premium reflecting its consolidation of Latin America’s fragmented $6 billion fitness market.

XP Research estimates an 8x 2024 EV/EBITDA multiple, a 20% discount to global peers despite higher projected net income growth. The results underscore Smart Fit’s balancing act: scaling through data-driven expansion while managing inflationary pressures in key markets.

With 57% of gyms still in maturation phases, the chain bets on operational leverage to offset near-term margin pressures. Its 2025 targets hinge on maintaining 19% annual membership growth and 13% average ticket increases-a formula tested by rising regional competition.