Margin weakness and LFL cracks overshadow the expansion story; D/g to Underweight

研报英文原文证据摘录

Margin weakness and LFL cracks overshadow the expansion story; D/g to Underweight

fixing and growing the core as a priority while also

looking at building adjacencies around the core business. In our view, this tone is

quite worrying at this stage, given Leejam has been embarking on this expansion

strategy for more than 18 months and the P&L profile has seen significant pressure

in terms of yield dilution, margin pressure and more recently LFL revenue

compression. While we welcome management’s focus on addressing LFL portfolio

weakness, we argue this comes at a tricky time with a growing number of centers

still in ramp-up stage, an increased pace of competition in the overall fitness market

and persistent pressure on group P&L performance when the street was expecting a

turnaround in the margin story and P&L return to growth to start playing out in

2026. That said, we now expect further delays to the P&L growth story and await

better visibility from management on the new strategy and any clear initiatives to

drive LFL performance and support profitability recovery.

• Center roll-out strategy remains in focus but poses its own challenges: As per

the latest disclosures, management guidance is for 25 new openings during 2026

(JPMe 23 openings) along with a near-term target to reach 250 Fitness Time centers

(FY 25 at 219 centers). Of these, the company has already opened 7 net new centers

during Q1 26, implying around 18 openings during the remainder of 2026. This

suggests another busy year in terms of new openings which means sustained

pressure on membership yields, SG&A intensity and operating margins, in our view.

For context, Leejam opened 29/16 centers during FY 24/25, adding c. 26% to its

existing network of 174 centers as of FY 23-end, although over this period the