XPOF Q2 Deep Dive: Portfolio Restructuring, CEO Transition, and Cautious Growth Outlook

Boutique fitness studio franchisor Xponential Fitness (NYSE:XPOF) missed Wall Street’s revenue expectations in Q2 CY2025, with sales flat year on year at $76.21 million. The company’s full-year revenue guidance of $305 million at the midpoint came in 4.5% below analysts’ estimates. Its non-GAAP profit of $0.26 per share was 11.1% below analysts’ consensus estimates.

Is now the time to buy XPOF? Find out in our full research report (it’s free).

StockStory’s Take

Xponential Fitness faced a difficult second quarter, with the market reacting negatively to both its flat revenue performance and updated financial outlook. Management attributed the muted results to challenges in certain core brands, such as a slowdown in same-store sales for Club Pilates and StretchLab, and the impact of brand divestitures. Newly appointed CEO Michael Nuzzo acknowledged the need to drive operational improvements, while CFO John Meloun highlighted that divestitures and transition costs weighed on results. The company also pointed to ongoing franchisee development delays, noting that 40% of its license backlog remains behind schedule.

Looking ahead, Xponential Fitness’s guidance reflects a more conservative approach amid several headwinds. Management cited the transition period following the CEO change, elevated marketing investments, and a cautious outlook on new franchise license sales. John Meloun emphasized, "We are spending about 25% more marketing dollars in the second half than the first half to try and mitigate those impacts." The company is prioritizing operational efficiency, further portfolio focus, and stronger brand marketing to regain momentum, but expects the benefits of these efforts to be realized gradually into 2026.

Key Insights from Management’s Remarks

Management pointed to a combination of portfolio streamlining, brand-specific trends, and operational changes as the main factors shaping recent results and near-term strategy.

• CEO transition and leadership changes: The quarter marked the appointment of Michael Nuzzo as CEO, succeeding Mark King. Nuzzo’s background in consumer and franchise businesses was highlighted as a strategic fit for driving growth and operational discipline.
• Brand divestitures and portfolio focus: Xponential completed the divestiture of CycleBar and Rumble, intending to concentrate resources on core brands such as Club Pilates, Pure Barre, YogaSix, and StretchLab. This move is expected to lower closure rates and improve average unit volumes over time.
• New retail partnership: The company entered a retail agreement with Fit Commerce to outsource its underperforming wholesale retail segment. This is expected to reduce overhead, introduce minimum guaranteed commissions, and improve operating margins, with most financial impact expected in 2026.
• Franchisee development delays: Management reported that 40% of its backlog is more than 12 months behind schedule, with a focus on terminating or re-engaging these licenses. The backlog issues are concentrated in recently divested brands CycleBar and Rumble, but also include core brands such as Club Pilates, StretchLab, and YogaSix. The majority of the delinquency originated from pandemic-related disruptions and legacy agreements.
• Increased marketing and operational initiatives: The company is ramping up marketing spend, especially for Club Pilates and StretchLab, and deploying a new field operations team to support franchisees and improve studio performance. A major Club Pilates brand campaign is launching in October to drive awareness and demand.

Drivers of Future Performance

Xponential Fitness expects a cautious growth trajectory, emphasizing operational efficiency, targeted marketing, and a tighter focus on its strongest brands as key themes for the coming quarters.

• Marketing and brand investments: The company is increasing marketing expenditures, especially for Club Pilates, including the first-ever national brand campaign, and expects these efforts to drive demand and potential same-store sales improvement, though benefits may not be immediate.
• Operational streamlining and license management: Management is prioritizing the termination or re-engagement of underperforming franchise licenses and implementing process changes to accelerate new studio openings. The goal is to improve the health of the development pipeline and reduce closure rates, with a gradual impact expected into 2026.
• Portfolio realignment risks: The recent divestitures, transition to a new CEO, and the impact of FDD (franchise disclosure document) renewal processes introduce operational complexity and potential near-term revenue headwinds. Management is cautious in its outlook as it realigns resources and navigates franchisee compliance and market uncertainties.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will monitor (1) execution of the Club Pilates marketing campaign and its effect on member acquisition and retention, (2) progress on addressing the franchise license backlog and improving new studio opening rates, and (3) the financial and operational benefits of the Fit Commerce retail partnership as it ramps up. The impact of ongoing portfolio streamlining and the new CEO’s strategic direction will also be critical factors to watch.

Xponential Fitness currently trades at $7.46, down from $9.62 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).

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