The fitness industry appears headed for a strong holiday season, but not everyone will see a boost.
The category has been on a rollercoaster for more than two years, with the Covid pandemic shifting workout routines and minting new sector winners. Now inflationary pressures and the post-lockdown reset look poised to benefit traditional gyms and trade-down options — threatening connected at-home fitness equipment like the products made by Peloton and Lululemon -owned Mirror.
Inflation remains a top concern for consumers, though October data showed slight easing . Holiday spending projections show that rising costs may result in a lot more muted gift-giving this year.
Demand appears to be stronger for experiences rather than things. The health and fitness category has a history of surviving pricing stresses, and it usually enjoys a bump from New Year’s resolutions.
“In ’08 plus ’09 physical fitness industry revenues and membership actually ticked up versus much of retail, ” Jefferies analyst Corey Tarlowe told CNBC, referring to the financial crisis and recession of that era.
Tarlowe, who covers Planet Fitness and Lululemon, said fitness investing remains steady, even among lower-income, inflation-squeezed consumers. But he sees gyms winning out over more expensive, at-home equipment. People are trading down plus shifting more toward value, he stated, “and that bodes well for Planet Fitness. ”
Return to gyms
Planet Health and fitness posted record regular membership and expanded its full-year guidance when it reported third-quarter earnings Nov. 8. The company said it had sixteen. 6 million members at the end of the quarter, an all-time high – even compared to the pre-pandemic period – and said this added 29 new locations during the particular period.
World Fitness CEO Chris Rondeau said members are exercising more, too: six times a month compared to five times per month when Planet Physical fitness went public in 2015. The organization also reported the decline inside its cancellation rate.
Rondeau said engagement for all age groups is near or above pre-pandemic levels. The company, known for its affordable memberships compared to a lot more luxurious fitness centers like Life Time plus Equinox, boasted strong customer acquisitions through its discounted offerings.
Luxury gyms are seeing positive trends, as well. Life Time upon Nov. 9 reported a 9% increase in members through 2021, and 4, 000 additional members compared with the prior quarter.
The cadence of additions is slower than from 2020 to 2021, but the luxury fitness brand continues in order to lure the higher-income client base along with in-person encounters such as the increasing popular sport pickleball .
Is fitness on the wish list?
Apparel retailers hope to continue benefiting from the particular resiliency in fitness.
Lululemon inside September showed strong demand for athleticwear from its higher-income consumer base. The business mentioned it was “not seeing any meaningful variation” in consumer behavior despite the macroeconomic environment and actually raised its 2022 guidance range by about $200 million to between $7. 87 billion plus $7. 94 billion.
The company will report its third-quarter results in December.
Other retailers are usually hoping home fitness will continue to be on want lists in the coming months. Dick’s Sporting Goods and Lowe’s — which recently expanded the assortment of exercise equipment plus accessories — have both touted the stability of the sector, even despite inflation.
But, as Jefferies’ Tarlowe notes, there’s more risk with capital-intensive, lower-margin equipment versus higher-margin products like athleticwear. Nevertheless, retailers like Lowe’s are confident that will demand will hold.
“The need for house fitness equipment has maintained since the outbreak, ” Lowe’s executive vice president of merchandising, Bill Boltz, said in the statement to CNBC. “Especially during the vacation gifting season, we are offering an increased selection of health and fitness accessories in stores. ”
Can Peloton peddle bikes?
Luxurious at-home products like Peloton , however , have struggled in recent months because consumers get out of the house and back to offices and health clubs. The stationary bike maker reported first-quarter results earlier this month that came in well below Wall Street’s expectations, logging a quarterly loss in subscribers and, according in order to calculations through UBS, a parallel drop in wedding — 16% year more than year.
Even as the company looks to drive new customers — selling its Bikes on Amazon plus at Dick’s Sporting Products , launching a rental program and putting bikes inside hotels across the country — analysts don’t think the particular value proposition is attracting more subscribers.
“It took a global pandemic in order to get from 1 mil subscriber to 2 million. Can you actually grow that foundation? ” Arpiné Kocharyan, the leisure, gaming and lodging analyst with UBS, stated in an interview with CNBC. “We have seen churn rates double year over year. inch
Peloton forecast second-quarter revenue of among $700 mil and $725 million, around $150 million below the $874 mil that Wall Street had been hoping with regard to, according to Refinitiv consensus estimates at the time of the particular report.
Lululemon, which acquired at-home physical fitness company Mirror in 2020 for $500 million , could be facing similar at-home headwinds. Executives did not disclose Mirror sales within the latest quarterly update, but the acquisition remained an expense around the company’s financial statements.
“I just don’t believe Mirror was strategically the best option for Lululemon, ” Jefferies’ Tarlowe mentioned. “It probably still is dilutive in order to earnings. They are investing in the business to help enhance the Reflection segment, yet I question the worth that will actually add overall to the company. ”
Reflect subscriptions have been wrapped in Lululemon’s new $39-a-month membership system , which also includes access to exclusive Lululemon products and some in-person workouts. The subscription is part of the company’s five-year plan to double revenue in order to $12. 5 billion by 2025, a plan that has drawn skepticism from a few analysts.
“Connected fitness as the phenomenon is here to stay, ” UBS’ Kocharyan said. “But are you going to see significant growth rates from where they are usually today, given that they saw this abnormally high growth rate in the middle of the particular pandemic? I would say there are more questions about them keeping those subscriptions and engagement high. inches
