One of the most sought-after items during the pandemic, after facemasks and hand sanitizer, were Peloton bikes. According to J.P. Morgan estimates, Peloton made roughly $1.8 billion in sales in 2020, a 100% increase from the year before. This year, however, told a different story.
On Tuesday the company announced a $1 billion stock offering, which followed a massive selloff last week that came on the heels of lower-than-expected 2022 first-quarter projections. Some see Peloton’s slide as the end of home gyms, but a Texas-based private equity firm argues it is still a good moment to invest in the home fitness equipment sector.
“We think Peloton has done a great job in getting into the homes, but we think that they’ve been oversold,” said Edward Crawford, president of Coltala Holdings, a Texas-based private equity firm that focuses on investing in family businesses and privately held companies in essential services, manufacturing and healthcare services. “What’s nice is that Peloton created a lot of the home gym movement over COVID. But the company we are investing sells the 95% of the surface area that surrounds a bike.”
Coltala Holding has closed on the acquisitions of three fitness equipment companies with 23 retail locations and a national presence in the commercial sector. The amount of the investment was not disclosed. The new company, Myfitnessstore.com, is the second largest independent fitness equipment dealer in U.S.
Simeon Siegel, an analyst for BMO Capital Markets who follows Peloton, agrees with Crawford’s argument. “I think that’s what’s important to remember; for so long Peloton was synonymous with at-home fitness,” Siegel said. “That’s simply not the case.”
Siegel believes the pandemic was in fact a bad thing for Peloton. “Peloton management saw the pandemic-driven, hyper-charged growth and invested in their company as if that growth would last forever,” he said. “At the same time, the heightened profile helped Peloton’s competitors raise their own.”
One source of competition is coming from affordable gym chains, such as Planet Fitness. On Nov. 4, Planet Fitness released a strong earnings report. For the third quarter of 2021, the company’s revenue increased 46.4% to $154.3 million. “We are emerging from the COVID-19 pandemic stronger than ever,” Planet Fitness CEO Chris Rondeau said during an earnings call. “In the third quarter, we returned to positive system-wide, same-store sales growth and achieved the highest sequential net member growth of any third quarter in company history.”
Rondeau said the company reached 15 million members recently, which is 97.7% of its pre-pandemic levels. According to Policy Advice’s fitness industry stats report, approximately 60 million Americans had a gym membership and worked out regularly in 2019. The same report suggested that 70% of gym-going respondents before the pandemic miss going to the gym.
“It’s like most things in life, that balance is the key,” said Ralph Manning, CEO of Coltala. “What I’ve observed in my gym, where I go work out, is that I still need that camaraderie. And I want to go to the gym two or three times a week, but not every day. The convenience of working out at home and saving time and then going back and forth is a big deal. Kind of had the best of both worlds.”
At-home fitness “is nascent, will grow and will not revert backward; however, I don’t think it will take over gyms,” Siegel said. “I think that at the end of the day, there will be people that do both. I think it is too early to call the winner, and I do not think [there is] going to be a winner.”