Inside the holiday season fitness fight

The fitness industry looks like it’s headed for the holiday season, but it’s not going to get better for everyone.

The category has been on a roller coaster ride for over two years, with the Covid pandemic changing workout routines and creating new sector winners. Inflationary pressures and post-lockdown resets now appear poised to benefit traditional Jim and tradedown options. Peloton When lululemonowned mirror.

Inflation remains the top concern for consumers, although October data showed some easing. Holiday spending forecasts suggest gift-giving may be modest this year due to rising costs.

It seems that the demand for experiences is stronger than things. The fitness category has a history of navigating pricing pressures and typically enjoys a bump from New Year’s resolutions.

“In 2008 and 2009, the fitness industry’s revenue and membership numbers actually increased compared to most of the retail industry,” Jefferies analyst Corey Tarlow told CNBC, referring to the financial crisis at the time. and referred to the recession.

Tarrow to cover planet fitness And lululemon said spending on fitness has remained steady, even among low-income, inflation-stricken consumers. thinking about. People are trading down and shifting to something more valuable, he said.

planet fitness We extended our guidance for the full year when we posted record membership numbers and reported third quarter earnings on November 8th. The company said it had 16.6 million members at the end of the quarter. This is an all-time high, even compared to the pre-pandemic era. – and said it added 29 new locations during the period.

Planet Fitness CEO Chris Rondeau says members are exercising more, too. When Planet Fitness went public in 2015, he went from five times a month to six. The company also reports a decline in cancellation rates.

Rondeau said engagement across all age groups is close to or above pre-pandemic levels. Known for affordable memberships compared to more luxurious gyms such as Life Time and Equinox, the company boasted strong customer acquisition through its discounted offerings.

Luxury gyms are also positive. lifetime A report on November 9th showed a 9% increase in membership from 2021, adding 4,000 members compared to the previous quarter.

Although the pace of additions will slow compared to 2020-2021, luxury fitness brands continue to attract high-income customers with in-person experiences such as the increasingly popular sport pickleball.

Apparel retailers hope to continue to benefit from the resilience of fitness.

lululemon September showed strong demand for athletic wear from a higher income consumer base. The company said it had “not seen a significant change” in consumer behavior despite the macroeconomic environment, and actually raised its guidance range for 2022 by about $200 million, from $7.87 billion to $7.9 billion. We made it $40 million.

The company plans to report third quarter results in December.

Other retailers hope home fitness will continue to be on their wish lists in the coming months. dick sports equipment When Lowes — recently expanded its range of exercise equipment and accessories — both touting stability in the sector despite inflation.

But as Jefferies’ Tarlowe points out, capital-intensive, low-margin equipment poses more risk than high-margin products like sportswear. Nonetheless, retailers like Lowe’s are confident that demand will hold up.

“Demand for home fitness equipment has sustained since the pandemic,” Rowe executive vice president of merchandising Bill Boltz said in a statement to CNBC. We are expanding our range of fitness accessories.”

luxury home products like PelotonBut the last few months have been tough as consumers leave their homes and return to the office or gym. , recording a quarterly decline in subscribers, with engagement down 16% year-over-year, according to UBS calculations.

By selling bikes on Amazon and Dick’s Sporting Goods, launching a rental program, and installing bikes in hotels nationwide, the company is trying to reach new customers, but analysts say the value proposition isn’t. I don’t think it attracts more subscribers.

“It took a global pandemic to go from one million to two million subscribers. Can you really expand that base?” Arpiné Kocharyan, Leisure, Gaming and Accommodation Analyst at UBS said: In an interview with CNBC, he said: “The churn rate has doubled for him year over year.”

Peloton forecasts second-quarter earnings of $700 million to $725 million, about $150 million short of Wall Street’s desired $874 million, according to Refinitiv’s consensus forecast. increase.

Lululemon, which acquired home fitness company Mirror for $500 million in 2020, may face similar headwinds at home. Management did not disclose Miller’s sales in its most recent quarterly update, but the acquisition remained an expense on the company’s financial statements.

“I don’t think Miller was strategically the best option for Lululemon,” said Tarlow of Jefferies. But the value it actually adds to the overall business is questionable.”

Mirror subscriptions are now part of Lululemon’s new $39/month membership program. This membership program also includes access to exclusive Lululemon products and in-person training. The subscription is part of the company’s five-year plan to double its revenue to $12.5 billion by 2025, and some analysts are skeptical of the plan.

“Connected fitness as a phenomenon is taking hold,” said Kocharyan of UBS. Will we be looking at rates? I think there are more questions about them keeping those subscriptions and engagement high.”