What Are the Potential Impacts on Leisure Stocks from Hurricane Milton Sun?

In a recent note to clients, analysts at Morgan Stanley examined the potential effects of Hurricane Milton Sun, a Category 5 storm heading towards Florida, on leisure stocks.

The impact on companies within the leisure sector is expected to vary. While some firms may experience minimal disruptions, others are more vulnerable due to the number of their locations situated in Florida.

Planet Fitness is noted as one of the most exposed companies, given its substantial concentration of corporate-owned stores in the state. Analysts highlighted that about 25% of Planet Fitness’s corporate locations are in Florida.

The report estimates that approximately 125 out of Planet Fitness’s 166 locations in Florida could be affected, based on the projected path of the hurricane. However, the analysts pointed out that the anticipated closures would need to last at least a month for a notable impact on the company’s financial performance. Notably, the company primarily operates under a franchise model, which provides some insulation from fleeting events like hurricanes, and the storm occurs during a low season for new memberships, reducing immediate financial risks.

In contrast, Life Time Group Holdings appears less vulnerable, with just five locations in Florida that represent less than 3% of its overall store count. Most of these locations are situated in southeastern Florida, which is expected to experience limited impact. While the Tampa club is currently closed until further notice, the other sites remain operational and are not expected to shut down.

Topgolf, part of Topgolf Callaway Brands, faces a moderate level of exposure with nine locations in Florida, making up about 10% of its total. Five of these locations—Tampa, Orlando, Fort Myers, Lake Mary, and St. Petersburg—are in the storm’s projected path and are currently closed.

Morgan Stanley analysts noted that the overall impact on Topgolf is likely to be limited unless significant damage occurs and do not anticipate extended closures unless serious structural issues arise.