Shares of Latin America's largest gym chain plunged 7.8% to BRL 18.38 on Thursday — the biggest drop on Brazil's Ibovespa — after second-quarter earnings revealed a widening gap between Smartfit's impressive top-line growth and the money actually reaching shareholders' pockets.
The Numbers Were Good Up Top, But Fell Short Where It Counts
Smartfit posted recurring net income of R$204 million, up 8% year-over-year, while net revenue climbed 22% to R$2.18 billion.
But the market had expected profit growth closer to 12% , and the shortfall sent a clear message: rapid expansion is generating revenue, but a growing share is being eaten before it reaches the bottom line. Recurring net margin — the percentage of revenue that becomes profit — fell to 9.4% from 10.6% a year ago, pressured by higher financial expenses and a larger tax bill.
Debt Is Funding the Build-Out, and That Debt Is Getting More Expensive
The company attributed the profit squeeze partly to debenture payments — essentially, interest costs on corporate bonds used to fund growth.
Capital spending jumped 37% year-over-year to R$625 million , and leverage rose to 1.20x net debt-to-EBITDA from 1.08x a year earlier. With Brazil's benchmark rate still elevated, every new gym opened with borrowed money carries a heavier interest burden.
The Operating Engine Is Still Humming
EBITDA — a measure of operating profit before interest and taxes — hit a record R$712 million, up 24% , with margin expanding to 32.7%.
Average membership fees rose 10%, and total gym members reached 5.58 million, up 8%.
The network expanded to 2,170 locations across 16 countries. These are not the hallmarks of a broken business.
Profit-Taking Amplified the Pain
Citi called the quarter "mixed," citing weaker-than-expected revenue alongside stronger cost control.
The sell-off was also fueled by profit-taking after a strong run, with losses attributed to "issues below the EBITDA line" — meaning the problem isn't in the gyms themselves, but in how much it costs to finance their growth. Analysts still rate the stock a consensus Strong Buy with a 12-month target of R$31.12 — roughly 69% above today's price , suggesting Wall Street sees this as a speed bump, not a breakdown.