Inside the fitness battle this holiday season

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Brody Longo trains on his Peloton sport bike on April 16, 2021 in Brick, New Jersey.

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Michael Loccisano | Getty Images

The fitness industry seems to be heading into a strong holiday season, but not everyone will see a boost.

This category has been a rollercoaster for over two years, as the covid pandemic has transformed exercise routines and churned out new winners in the sector. It now appears that inflationary pressures and a post-lockdown reset are set to benefit traditional gyms and barter options – threatening home-related fitness equipment such as products made by peloton And lululemonowned mirror.

Inflation remains a major concern for consumers, although data for October showed a slight downturn. Holiday spending forecasts show that rising costs could lead to more quiet gift-giving this year.

The demand seems to be stronger for experiences rather than for things. The fitness category has a history of pricing pressure, and it usually enjoys a rebound from its New Year’s resolutions.

“In 2008 and 2009, the fitness and membership industry’s revenue went up against a lot of retail,” Jefferies analyst Corey Tarlow told CNBC, referring to the financial crisis and recession of the era.

Tarlowe covers Planet Fitness And Lululemon, said fitness spending remains flat, even among low-income consumers experiencing inflation pressures. But he finds gyms outperform more expensive home equipment. People are trending lower and trending more towards value, he said, “and that bodes well for Planet Fitness.”

Back to the gyms

Planet Fitness It posted record membership and extended its guidance for the full year when it reported third-quarter earnings on November 8th. The company said it had 16.6 million members at the end of the quarter, an all-time high — even compared to the pre-pandemic era. – She added 29 new locations during the period.

Planet Fitness CEO Chris Rondo said members exercise more, too: six times a month versus five times a month when Planet Fitness went public in 2015. The company also reports a decrease in its cancellation rate.

Rondo said participation by all age groups is near or above pre-pandemic levels. Known for affordable memberships compared to more upscale gyms like Life Time and Equinox, the company has gained strong customers with its discount offers.

Chris Rondo, CEO of Planet Fitness.

Adam Jeffery | CNBC

Luxury gyms are seeing positive trends, too. life times On November 9, it reported a member increase of 9% from 2021, and 4,000 additional members compared to the previous quarter.

The pace of additions is slower from 2020 to 2021, but the luxury fitness brand continues to attract its high-income customer base with personalized experiences like the increasingly popular gym pickleball.

Is fitness on your wish list?

Apparel retailers hope to continue to benefit from flexibility in fitness.

lululemon In September it showed strong demand for sportswear from its high-income consumer base. The company said it “sees no meaningful change” in consumer behavior despite the macroeconomic environment and raised its guidance range for 2022 by about $200 million, to between $7.87 billion and $7.94 billion.

The company will report its results for the third quarter in December.

Other retailers are hoping that home fitness will continue to be on their wish lists in the coming months. Dick’s Sporting Goods And Louie — which recently expanded its assortment of exercise equipment and accessories — has promoted the stability of the sector, despite inflation.

But, as Jefferies’ Tarlow notes, there’s more risk with capital-intensive low-margin equipment versus higher-margin products like sportswear. However, retailers like Lowe’s are confident that demand will continue.

“The demand for home fitness equipment has continued since the pandemic,” Lowe’s executive vice president of marketing Bill Boltz said in a statement to CNBC. “Especially during the holiday gifting season, we offer an ever-growing selection of fitness accessories in stores.”

Can Peloton Touring Bikes?

Home luxury products like pelotonHowever, it has struggled in recent months as consumers move out of the house and back into offices and gyms. The stationary bike maker reported first-quarter results earlier this month that came in well short of Wall Street’s expectations, posted a quarterly loss in subscribers, and, according to UBS’ calculations, participation fell in parallel — 16% year-over-year.

Even as the company looks to attract new customers — selling its bikes on Amazon and at Dick’s Sporting Goods, launching a rental program and placing bikes in hotels across the country — analysts don’t think the value proposition is attracting more subscribers.

“It took a global pandemic to go from 1 million subscribers to 2 million subscribers. Can you actually grow that base?” Arpiné Kocharyan, entertainment, games and housing analyst at UBS, said in an interview with CNBC. “We’ve seen disruption rates double year-on-year.”

Peloton expected second-quarter revenue to be between $700 million and $725 million, about $150 million less than the $874 million Wall Street had hoped for, Refinitiv estimated at the time of the report.

Lululemon, which acquired home fitness company Mirror in 2020 for $500 million, may face similar home-based headwinds. Executives didn’t disclose Mirror’s sales in their most recent quarterly update, but the acquisition remained an expense on the company’s financials.

“I don’t think Mirror was strategically the best choice for Lululemon,” said Tarlow of Jefferies. “It’s probably dilutive. They’re investing in the business to help boost the mirror segment, but I wonder what value it’s actually going to add to the business overall.”

Mirror subscriptions have been wrapped in Lululemon’s new $39-a-month membership program, which also includes access to exclusive Lululemon products and some personal training. The subscription is part of the company’s five-year plan to double revenue to $12.5 billion by 2025, a plan that has raised skepticism from some analysts.

“Connected fitness as a phenomenon is here to stay,” said UBS’s Kocharian. “But are they going to see significant growth rates than they are today, given that they saw an abnormally high growth rate in the middle of a pandemic? I would say there are more questions about keeping those subscriptions and engagement high.”

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