Despite the general gloom of the retail industry, there are plenty of segments that are thriving. But there aren’t many of them that are also impervious to Amazon.
The fitness industry is turning out to be a retail share winner and increasingly occupying mall and other retail real estate left vacant by bankrupt apparel retailers or department stores shuttering their doors.
“It’s a sector that’s not being hurt by Amazon, which is the key,” Jefferies analyst Randal Konik told eMarketer Retail.U.S. health club industry revenue increased about 7% to a record $27.6 billion last year.
The fitness industry has seen the number of health clubs rising each year to nearly 36,540 at the start of this year, up each year since at least 2005 for a total growth of 36% over that time, according to industry trade group the International Health, Racquet & Sportsclub Association, or IHRSA. A record 66 million plus Americans used a health club in 2016 since IHRSA began tracking the statistic in 1987 while the number of individual members also rose to a record 57.3 million. As a result, U.S. health club industry revenue increased about 7% to a record $27.6 billion last year, IHRSA data showed.
“We have greater conviction in the industry's bright trajectory,” Konik, who covers low-cost fitness club chain Planet Fitness and Life Fitness and Cybex equipment parent Brunswick Corp., said in an 82-page report, his first deep-dive on the fitness industry. “Industry dynamics remain compelling… Health/wellness is a (long-term) trend. No longer are club memberships solely in the hands of affluent households.”
The IHRSA data also suggest the industry may still have plenty of room for growth: only 19.3% of the nearly 300 million Americans ages 6 and older belong to a health club, it said.
However, while the overall sector outlook is positive, the fitness industry also has been undergoing a shakeup of its own not unlike apparel and other sectors: On the one hand, low cost and no-frills chains such as the 1,300-plus store chain, Planet Fitness, which charges up to $20 a month, are gaining ground. Meanwhile, upscale niche boutique fitness studios from Soul Cycle to Pure Barre are also taking share.
But mid-priced players such as Town Sports International, parent of such chains as New York Sports Club, are getting squeezed.
For instance, boutique fitness studios have increased their dollar share of the market to 35% in 2015 from 21% in 2013 while the share of traditional gyms declined to 65% from 79% during the same period, Jefferies report citing IHRSA data said. Meanwhile, budget gyms like Planet Fitness have seen growth of 70% the past two years and premium studios like Soul Cycle, which charges $34 for just one class and doesn’t offer membership, has seen a 21% increase during the same period, according to the Jefferies study, citing IHRSA and Mintel data. In a sharp contrast, the mid-market gym only saw a 2% growth during the same period.
In another telling contrast, Town Sports International’s comparable sales have declined in each of the past four years. The company said in April its Q1 revenue declined to $99.1 million from $101.3 million a year earlier as it closed stores. It continued to lose money.