Roger's 1997 Short Picks Message Board

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Strategies & Market Trends : Roger's 1997 Short Picks

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To: Eric Klein who wrote (7459)	11/23/1997 8:49:00 PM
From: Pancho Villa	Read Replies (2) of 9285

Eric RE: BFIT. IMO it looks like we have [hopefully] got the dynamics of the gym business right. I agree with you that the potential for these shops is very small. Also, the price alasticity of demand will remain high. The fact is that a significant portion of the crowd they attract can not afford the type of money they wish they could. Also, let's face it most people do not and will not excersice regularly (I do - my wife, an MD, forces me - but it is a fact of life that the mayority do not). IMO the future of BFIT is going to continue being pretty much like the past. They wish revenues (per capita and total) were such that margins would increase to around 20% but IMO wishing is as far as they will get. Actually the profitability (if you can talk about profits) of the business will deteriorate as they try to invest in a business that does not provide adequate return on investment. Please notice that I am using my common sense coupled with a tiny bit of knowledge about how this business operates here and overseas to reach my conclusion. I am not an expert in gym operations but consider myself as possesing fairly good business acumen, derived mainly from the days I used to work in consumer goods marketing for PG and whatever business one learns from doing cases at an Ivy B. school. I guess what I am trying to say is you should trust your own homework much more than what Pancho says. All I can tell you is that it is MY MONEY involved in this short, that it is one of my largest short positions, and that I would like to think I am not in the business of throwing my capital around (all this being said I remind you of Neisendorfer(SP?) being wiped out about a month ago but again most of what he lost was someone else's money!). Regards, Pancho

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