In the holiday fitness battle

Brody Longo rides his Peloton exercise bike on April 16, 2021 in Brick, NJ.

Michael Lochizano | Getty Images

The fitness industry appears to be in for a strong holiday, but not everyone will see a boost.

The category has been on a roller coaster ride for more than two years, with the Covid pandemic changing workout routines and creating new industry winners.Now, inflation pressures and post-lockdown resets look poised to benefit traditional gyms and trade-in options – threatening connected home gym equipment, such as those made by large force and Lululemon– Owned mirror.

Inflation remains the top concern for consumers, although data for October showed a slight moderation. Holiday spending forecasts show that rising costs could lead to fewer gift-giving this year.

The need for experiences seems to be greater than the need for things. The fitness category has a history of surviving pricing pressures and often gets hit with New Year’s resolutions.

Jefferies analyst Corey Tarlowe told CNBC of the era’s financial crisis and recession: “In ’08 and ’09, the fitness industry actually increased revenue and memberships more than most of the retail industry.”

Tarlowe, who covers Planet Fitness Even among low-income, inflation-pressured consumers, fitness spending has held steady, Lululemon said. But he sees gyms trumping more expensive home equipment. People are trading at lower prices and moving more toward value, he said, “which bodes well for Planet Fitness.”

back to the gym

Planet Fitness It posted record membership and expanded full-year guidance when it reported third-quarter earnings on Nov. 11. 8. The company said it ended the quarter with 16.6 million members, an all-time high — even compared to the pre-pandemic era — and said it added 29 new locations during the period.

Chris Rondeau, CEO of Planet Fitness, said members are also exercising more: 6 workouts a month, compared to 5 when Planet Fitness launched in 2015. The company also reported a drop in its cancellation rate.

Participation across all age groups is near or above pre-pandemic levels, Rondo said. The company is known for its affordable memberships, with strong customer acquisition through its discounted offerings, compared to more luxurious gyms like Life Time and Equinox.

Chris Rondeau, CEO of Planet Fitness.

Adam Jeffrey | NBC Finance

Luxury gyms are also seeing positive trends. life He reported a 9% increase in membership compared to 2021, an increase of 4,000 members compared to the previous quarter, he reported on Nov. 9.

The pace of increase is slower than in 2020-21, but the luxury fitness brand continues to appeal to its high-income customer base with in-person experiences like the increasingly popular sports kimchi ball.

Is fitness on the wish list?

Apparel retailers want to continue to benefit from fitness’s resilience.

Lululemon In September, demand for activewear among high-income consumers was strong. Despite the macroeconomic environment, the company said it “did not see any meaningful change” in consumer behavior, actually raising its 2022 guidance range by about $200 million to between $7.87 billion and $7.94 billion. between.

The company will report its third-quarter results in December.

Other retailers hope that home fitness will continue to be on wish lists in the coming months. Dick’s Sporting Goods and Lowe’s The company has recently expanded its range of fitness equipment and accessories, all of which tout the industry’s stability despite inflation.

But, as Jefferies’ Tarlowe points out, capital-intensive, lower-margin equipment is more risky than higher-margin products like sportswear. Still, retailers such as Lowe’s believe demand will remain the same.

“Demand for home fitness equipment has remained constant since the pandemic,” Bill Boltz, Lowe’s executive vice president of merchandising, said in a statement to CNBC. “Especially during the holiday gift-giving season, we have a wider selection of fitness accessories in the store.”

Can Peloton sell bikes?

luxury home products such as large forceHowever, it has struggled in recent months as consumers get out of their homes and back into offices and gyms. The stationary bike maker reported first-quarter results earlier this month that fell well short of Wall Street’s expectations, with a quarterly loss for subscribers and a parallel decline in engagement — down 16% year over year, according to UBS calculations.

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

“The global pandemic went from 1 million users to 2 million users. Can you really expand that base?” Arpiné Kocharyan, a leisure, gaming and lodging analyst at UBS, told CNBC in an interview. “We’ve seen churn double year-over-year.”

Peloton forecast second-quarter revenue of between $700 million and $725 million, about $150 million below the $874 million Wall Street had been hoping for, according to Refinitiv consensus estimates at the time of the report.

Lululemon, which acquired home fitness company Mirror for $500 million in 2020, could face similar home resistance. Executives didn’t disclose Mirror’s sales in the latest quarterly update, but the acquisition remains an expense in the company’s financial statements.

“I just don’t think Mirror is strategically the best option for Lululemon,” Jefferies’ Tarlowe said. “It may still dilute earnings. They are investing in the business to help strengthen the Mirror unit, but I question the value that will actually be added to the business as a whole.”

Mirror subscriptions are included in Lululemon’s new $39 per month membership plan, which also includes access to exclusive Lululemon products and some in-person workouts. Subscriptions are part of the company’s five-year plan to double revenue to $12.5 billion by 2025, which has raised skepticism among some analysts.

“Connected fitness is here to stay as a phenomenon,” said UBS’s Kocharyan. “But, given that they’ve seen this unusually high growth rate during the pandemic, are you going to see a significant growth rate compared to today? I’d say it’s still a bit of a stretch for them to keep subscriptions and engagement high. There are more questions.”

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