FactSet Research : Telling the Story of the Pandemic Through the Fitness Industry | MarketScreener

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FactSet Research : Telling the Story of the Pandemic Through the Fitness Industry | MarketScreener








One year ago, FactSet Insight outlined the changes seen in the fitness industry throughout the pandemic:the causes, shifts to alternative workout routines, and the role of technology. The article concluded by highlighting the uncertainty for the industry going forward. Since then, we’ve seen more lockdowns, multiple vaccines, a Joe Wicksobsession in the UK, and the rise and fall of Peloton. In what can be dubbed the “Peloton Pandemic,” the shape of the industry has changed dramatically over the last two years with Peloton and the entire fitness industry telling the story of the wider pandemic.


Home Office, Home Gym

Changes in the fitness industry have been compounded and accelerated in unprecedented ways by the pandemic; just as the office has been transported into the home, so has the gym. Initially enforced by lockdowns and gym closures, at-home-fitness culture boomed as gym enthusiasts were left without alternatives and the wider public sought ways to be productive and look after their physical and mental health in a time of physical and emotional gridlock. Joe Wicks and others showed the masses how to exercise at home, facilitated by evolving technology capabilities such as Zoom, Strava, and online classes from big playerssuch as Equinox. Subscription-based and on-demand platforms boomed with fitness following entertainment’s footsteps. FaaS (Fitness as a Service) anyone?

To analyze the “at-home gym” stock market, we examined a basket of securities including Peloton, as well as a few other key players:

  • Dorel Industries, a leading manufacturer of, among other things, electric bikes
  • Nautilus, which brought to market what is perhaps Peloton’s primary competition, Bowflex bikes
  • Garmin, a provider of GPS technology, including heart-rate-tracking watches and other personal fitness devices

Examining a two-year relative returns horizon takes us almost exactly to just before the beginning of the global pandemic. Prior to COVID-19, at-home-fitness stocks were all underperforming the S&P 500; when the pandemic hit in March 2020, the stocks dropped significantly, in line with global markets. The stocks in our portfolio all followed a similar pattern over the two-year period, falling at the start of the pandemic before rising to all-time highs at the end of 2020.

  • Nautilus saw returns approximately 30x those of the S&P 500 for the first year of the pandemic; this was followed by a return towards the benchmark as Western lockdown measures were eased during 2021
  • Dorel’s stock was boosted by the sale of Dorel Sports-its cycling segment-for $810 million to Pon Holdings, a Dutch manufacturing and engineering firm. The sale was announced in October 2021 and finalized in January 2022.
  • Garmin’s stock price has closely followed the market over the last two years-significantly more so than any other stock in this basket. The company successfully ventured into other sectors, including marine, auto, and aviation services, while pursuing an active acquisition strategy throughout the pandemic.
  • Peloton stock climbed rapidly in 2020, ending the year with returns 440% higher than the S&P 500. However, as lockdown measures eased in 2021, Peloton’s growth stalled. The company significantly underperformed analysts’ estimates for the quarter ending September 2021, reporting a loss of $380 million. According to FactSet Estimates, the chart below shows that an 85% buy recommendation for the stock dropped to 48% over the span of eight months (March 2021 to November 2021).


Are People Returning to the Gym?

Turning to on-premises gyms, there are significantly fewer publicly traded stocks than in the at-home category. The category was reduced further because we needed to exclude Town Sports International Holdings. Town Sports, which owned and operated brands such as New York Sports Clubs, Boston Sports Clubs, Philadelphia Sports Clubs, Washington Sports Clubs, Lucille Roberts, and Total Woman, filed for Chapter 11 bankruptcy in September 2020.

That left us with U.S.-based gym giant Planet Fitness, UK gym operator The Gym Group, and North American company Life Time Group Holdings. However, Life Time only recently went public in October 2021.

This basket of on-premises-gym securities tells its own story of the pandemic, one that is nearly a perfect inverse of the at-home-fitness stock market over the last two years. After being more negatively impacted than the benchmark by Covid initially, these stocks continued to underperform as on-premises gyms remained closed through lockdowns and were forced to consider expanding their offerings into the home market. However, as restrictions were eased in 2021, growth has more closely mirrored the S&P 500.

The evolution of Planet Fitness tells a story that contrasts directly with that of Peloton. To augment its business over the last two years, Planet Fitness has expanded its reach into the home fitness market, taking on more debt and boosting its digital offerings for club members. These moves are being well received by gym-goers and market analysts alike. In stark contrast to Peloton, the consensus ratings chart below shows that the share of analyst buy ratings rose from 56% to 71% between March 2021 and November 2021.

A UK-only company, The Gym Group’s price performance has been strongly tied to national lockdown rules. For example, the stock’s price jumped 30% hike on November 4-6, 2000, as the British government imposed one-month lockdown restrictions that were significantly less severe than anticipated by the public and press.


How Do At-Home Vs. On-Premises Fitness Companies Compare Today?

We saw dramatic swings in the stock performance of at-home vs. on-premises fitness stocks over the last two years. How have the two groups performed over the last three months?

We created two simple custom composites to compare them, as shown in the chart below. The chart indicates that on-premises gyms (green line) have been outperforming at-home stocks (red line) and have been more closely following the S&P 500 (blue line) over the last three months. However, the difference between the three is not nearly as stark as we saw at various points over the last two years.

The key takeaway here is that the fitness industry appears to have mirrored work culture and moved to a hybrid model in which consumers participate in both virtual and in-person activities. As a result, at-home and on-premises fitness stocks have essentially converged toward the benchmark in recent months.


Investing in Fitness

To quantify the growth of the fitness industry over the last decade, we leveraged the FactSet RBICS classification system to identify a broader list of companies associated with the fitness industry; this allowed us to expand our analysis beyond the companies that we identified above in the at-home and on-premises fitness industries.

After limiting our universe to companies with sales data available for the last five years, we aggregated the net sales figures by FactSet RBICS subcategory and then summed the data to get an overall net sales figure. As shown in the table below, aggregate net sales for our subset of securities have grown every year over the last five years, increasing by nearly 34%, from $4.9 billion to more than $6.5 billion over that period.


Aggregate Net Sales for Fitness-Related RBICS Categories ($ millions)

RBICS Category

FY0

FY-1

FY-2

FY-3

FY-4

FY-5

Total

6,523,043

6,418,554

5,849,091

5,708,139

5,505,206

4,872,570

Fitness and Recreational Sports Centers (3)

1,134

1,003

1,216

1,061

928

892

Winter Sports (1)

39

88

88

85

83

79

Activewear and Outerwear Apparel Production (23)

3,170,134

3,121,827

2,884,272

2,708,646

2,624,095

2,158,220

Athletic Footwear Production (12)

1,958,540

2,132,415

1,880,921

1,931,062

1,826,128

1,614,484

Fitness and Exercise Equipment (8)

57,870

43,077

37,369

32,996

32,123

28,645

Golf Equipment (14)

99,028

107,859

108,438

101,343

90,088

93,507

Other Sporting and Athletic Goods (30)

1,217,657

996,205

921,713

918,220

917,935

963,760

Team, Individual and Other Sports Manufacturing (2)

43

31

27

22

19

21

Sporting Goods Stores (4)

13,615

11,863

11,291

11,356

10,685

9,942

Global Positioning Systems (GPS) Manufacturing (1)

4,983

4,187

3,758

3,347

3,122

3,019

Note: Number of companies in each category shown in parentheses

Source: FactSet

The good news for investors is that there is already an exchange-traded fund (ETF) that will allow them to participate in the growing but ever-shifting fitness trend. In May 2016, the BFIT Global X Health & Wellness ETF launched, tracking an index of equities from companies promotingphysical well-being. The selection universe includes small-, mid-, and large-cap companies from developed countries that earn most of their revenue from or whose stated business objective relates to good physical health. Health and wellness cross the sector boundaries found in traditional classification systems to include nutrition and weight loss, nutritional supplements, and fitness equipment and apparel, among others. According to FactSet’s fund flows data, there has been an increase of 2-3x AUM for this ETF over the last three years (green line), with net positive fund flows into the ETF over the last year (blue line).


Conclusion

Clearly the fitness industry was and is booming; the pandemic merely shifted the channels of growth. We’re seeing at-home gyms and on-premises gyms converging to a hybrid model and a “new normal.”

The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.

Disclaimer

FactSet Research Systems Inc. published this content on 07 March 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 March 2022 15:09:05 UTC.

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Sales 2022 1 725 M

Net income 2022 448 M

Net cash 2022 259 M

P/E ratio 2022 35,3x
Yield 2022 0,82%
Capitalization 15 612 M
15 612 M
EV / Sales 2022 8,90x
EV / Sales 2023 8,25x
Nbr of Employees 10 898
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FactSet Research Systems Inc. Technical Analysis Chart | MarketScreener

Technical analysis trends FACTSET RESEARCH SYSTEMS INC.

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Income Statement Evolution

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Mean consensus HOLD
Number of Analysts 16
Last Close Price
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Average target price
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Spread / Average Target 3,49%




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