The latest earnings from Life Time and Planet Fitness offer a perfect case study in how the K-shaped economy actually works. While economists debate abstract concepts, these two gym chains are living proof: affluent consumers are spending freely while budget-conscious Americans pull back.
Life Time, the luxury fitness operator with memberships averaging $200+ per month, reported strong revenue growth and expanding margins. Their high-end clubs offering spa services, coworking spaces, and premium amenities are packed with professionals willing to pay for exclusive access.
Meanwhile, Planet Fitness - the $10-per-month gym that built its brand on accessibility - is seeing membership growth slow and same-store traffic decline. The budget fitness model that thrived during the expansion is now facing pressure as lower-income consumers cut discretionary spending.
This isn't about fitness preferences. It's about economic bifurcation. The top 20% of earners have seen wage growth, asset appreciation, and strong job security. They're upgrading their gym memberships along with everything else. The bottom 60% are dealing with real wage stagnation, depleted savings, and employment uncertainty.
The numbers make it concrete: Life Time can charge premium prices and maintain occupancy because their customer base isn't price-sensitive. Planet Fitness built a volume model that depends on keeping prices low and membership counts high. When volume growth stalls, the model breaks.
This dynamic extends far beyond fitness. Look at restaurant earnings - fast casual chains serving affluent suburbs are outperforming quick-service restaurants in working-class areas. Check retail data - luxury goods sales remain strong while mass-market retailers struggle. The pattern is consistent across consumer sectors.
For investors, this means sector-level analysis isn't enough anymore. You need to understand which income cohort a company serves. Businesses catering to high earners are in a different economy than those serving middle and lower-income consumers.
Corporate strategists are already adjusting. We're seeing retailers abandon the "affordable luxury" positioning that worked in 2015-2019. The market is polarizing - you're either premium or budget, and the middle is getting squeezed.
The K-shaped recovery isn't a temporary phenomenon. It's the new baseline. Income inequality has structural causes that won't resolve quickly. Companies that recognize this and position accordingly will outperform those still operating on pre-pandemic assumptions.
Life Time and Planet Fitness are the same industry telling two completely different stories. That's the K-shaped economy in earnings report form.
