2012/13 SNEWS FitBiz Retailer Report: Store counts rise for first time in six years

For the first time since 2007, the number of U.S. specialty fitness retail stores increased year-over-year, ending a six-year slide.
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The bleeding has stopped and the wound is healing.

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For the first time since 2007, the number of U.S. specialty fitness retail stores increased year-over-year, ending a six-year slide set off by the great recession and a shifting consumer landscape.

In its tenth annual FitBiz Retailer Report, SNEWS tallied 311 specialty fitness storefronts (owned by 36 separate businesses) with their doors open at the end of 2012. That represents a 3.3 percent increase from 301 locations (owned by 35 separate businesses) at the end of 2011. To be included on our list, companies had to have three or more locations in the United States. Commercial-only showrooms or by-appointment only locations were not included.

In 2012, nine specialty fitness retailers on our list added a total of 16 stores, versus six businesses closing a total of eight stores. The remaining majority — 21 companies — stayed even in store count.

Only one business, Fitness Gallery, dropped off our list, falling below the three-store threshold; while two companies, Colorado Home Fitness and First Place Fitness, joined our list, each opening their third stores in 2012.

The net positive figure is welcome encouragement and validates SNEWS’ assessment a year ago, that a bottom had been reached and a rebound was underway. The question now: How big a scar will be left? Fitness retailers are still a far cry from the 540 stores we counted in 2007, and that list included only businesses with five or more locations.

Even if the broader economy recovers, retailers tell us other challenges await, such as the growing shift toward e-commerce and direct-to-consumer sales. And the fitness industry is fast-evolving with rising categories such as CrossFit, trail running, GPS watches and fitness mobile apps dominating the headlines, but not necessarily benefiting in-store sales.

Commercial and institutional fitness equipment sales continue to play a larger role in the retail mix, keeping many operations afloat during tough times. Retailers also told us that cardio equipment — bikes and ellipticals — continue to outshine traditional home gyms, although there are signs of life in the strength category with functional trainers.

All things considered for 2013 and beyond, the fitness world likely will experience both growth and evolution.

Growth spurts
Leisure Fitness continued to grow this year, adding five new stores, said Andy Leshik, Leisure Fitness’ director of sales and marketing. One reason for the company’s success, Leshik said, is that it focused on offering free wellness seminars at local businesses and corporations, which led to increased vertical sales and some increase in retail sales.

“It’s getting stronger every year,” Leshik said. “It’s not pre-2008 levels but it’s definitely improving.”

Colorado Home Fitness added one new store in early 2012 and Owner Chip Hunnings was one of the few who told us business was consistent.

“I wouldn’t say that I would classify [business] as extremely healthy yet, but at least it was consistent,” Hunnings said.

The West Coast, particularly California, also saw signs of growth — filling in the gaps from previous bankruptcies — with Precor Home Fitness adding two new stores and Busy Body Home Fitness and California Home Fitness each adding one new store.

Staying steady
Similar to year ago, a majority of fitness retailers made no changes in 2012.

While there were store relocations here and there, many businesses kept their location totals even. The steady count, ironically, is in part due to unsteady business, most retailers told us.

“Retail has been a bit of roller coaster,” said Albert Kessler, president of HEST Fitness, with three locations in Texas. “One month it’s great, the next, not so much.”

Without a clear upward trend — and budget crisis after crisis in Washington — many retailers told SNEWS they’re just not ready to add stores. But, there’s definitely more optimism than pessimism. Several retailers said they’ve got their eyes peeled for new locations and are ready to pull the trigger when an opportunity presents itself.

“We have a few territories earmarked,” said Darren Piggins, co-owner of Home Workout in California. “We’re just waiting on good retail locations to arise.”

Increased housing starts are a positive sign, said Steve Kelly, CEO of Bob Block Fitness with three stores in Indiana. More homes tend to lead to more fitness equipment sales, but unemployment levels need to improve, too, he said.

Another positive trend that might push retailers to add stores is a rise in high-end sales, several owners told SNEWS.

“We’re selling more higher-ticket items,” said Gary Glanger, co-owner of FitCorp USA with 16 stores — including Fitness Headquarters, Busy Body and Fitness in Motion — in Texas. “I think that’s being fueled by real innovations coming from the manufacturers, particularly on the technology end and new ellipticals like the [Octane’s] LateralX,” he said. “If they own a $4,000 elliptical, it would seem they’re willing to spend again and they want the $6,000 elliptical with the new technology.”

Kessler echoed that trend, adding that some high-end customers are even willing to buy pricey commercial equipment for their homes. The low- and middle-end, however, is still being conservative, he said.

“We see a lot of them buying these $10-a-month, no-contract gym memberships instead,” he said.

“Hopefully we’ll see some of these people down the road as they get more motivated to stay in shape,” Kessler said.

CrossFit craze
Entry-level fitness consumers are also flocking toward the year’s hot trend of CrossFit, an extension and evolution of the body-weight training trend that includes a dose of cardio.

Similar to those categories, which boomed during the recession, part of CrossFit's appeal is its inexpensive, or nontraditional, equipment.

Most fitness retailers remain skeptical and are still figuring out how to benefit from the boom.

“We have a lot of untrained people coming into the store thinking they can get fit with a battle rope, sledge hammer and kettlebells,” Piggins at Home Workout said.

Many retailers said since the functional fitness and CrossFit trend emerged, sales of the larger home gyms have gone down as consumers are opting for smaller items they can attach TRX bands to supplemented with items like the Bosu Ball and kettlebells.

“Definitely the strength side of the industry has shifted,” said Leisure Fitness’ Leshik.

Colorado Home Fitness’ Hunnings said the craze hasn’t led to a big increase in business. “It translates a little bit to the retail side in accessories and bumper plates,” Hunnings said, “but it doesn’t make a big impact on our business.”

Steve King of Better Body Fitness of Montana said the CrossFit Craze isn’t good for business.

“It’s a little frustrating from the standpoint of being in strength and cardio industry when you’re looking at [CrossFit] reviews online with comments from trainers like, ‘You don’t need a home gym to do the workouts,’” King said.

Others are bit more optimistic.

Dave Sheriff of the Colorado-based HealthStyles said he’s experienced an increase in sales of items like TRX products, Bosu Balls and kettlebells.

“It’s definitely a good thing for the industry in the long run,” said Ray Chodorowski, owner of California Home Fitness, which today has grown to five locations from a single store in 2009. “While it may not replace home gym sales, it does create excitement and gets people into fitness.”

Internet sales
Specialty retailers who have gotten into e-commerce say sales continue to rise, and in some instances it helps support a rise in physical storefronts.

“Most of our advertising dollars [both for e-commerce and brick-and-mortar] are being spent on the Internet, Chodorowski said. “It’s also driving a lot of phone orders.”

“There are a lot of Internet comparison shoppers,” said Dusty Schlotfeldt, co-owner of Fitness Experts in Chicago. “Few customers are buying on their first visit. In addition to our stores, we sell online and we’re doing well there.” Rowers are hot at the moment, he said. And in some cases, customers might find the product online, but then buy it in the store to avoid heavy shipping fees.

The Internet also is leading to more direct-to-consumer sales, which is of concern to retailers, as some manufacturers are finding it easier and profitable to bypass the middleman. Brands like Nautilus have increased their direct-to-consumer business with successful results.

Retailers tell SNEWS there’s a breaking point, however, when manufacturers begin to undercut their specialty retail business with sales and promotions. Retailers are shifting their allegiances toward those who better support specialty retail.

HealthStyles' Sheriff is taking advantage of the interest in Internet shopping by focusing more effort on the company’s online sales, much of which are accessories for CrossFit. Though big-ticket items are only available online to locals, Sheriff said he deals accessories to people around the country.

Home-gym decline
Leisure Fitness’ Leshik attributes the sharp decline in home-gym sales to the rising popularity of CrossFit.

“The large home gym purchases are definitely down,” Leshik said.

“Home gyms are not selling like they did years ago,” said Steve Sova of Health and Fitness Equipment in Ohio. The traditional strength training has been replaced with more of movements used in P90X and functional training, Sova said.

“We’ve actually eliminated a lot of the traditional home gyms from our show floor,” Schlotfeldt at Fitness Experts said. “It’s mostly treadmills, ellipticals and functional trainers now.”

Winter weather
In a 180-degree-turn from a year ago, when summer appeared in March, this year’s widespread cold temperatures and snow through April helped many retailers extend the indoor-equipment selling season, which should bode well for some in 2013.

Cooler temperatures in Colorado have led customers to give HealthStyles its best April in five years, Sheriff said. Numerous winter storms in April and even one on May 1 boosted sales.

While that’s good up north, it’s not so good down south, Kessler at HEST Fitness pointed out. Cooler temperatures in his neck of the woods means 60s and 70s, perfect weather to recreate outdoors. It’s the hotter temperatures and high humidity that drive people to exercise indoors in the south, he said.

As spring finally arrives in the north, Sheriff and several other retailers told SNEWS that they’re stocking up on the ElliptiGo — an outdoor elliptical rider that has sold well in its first two years.

“That’s an exciting little off-season product that we sell a lot of,” Sheriff said.

Big boys doing well too
The SNEWS FitBiz Retailer Report also tracks the big boys in fitness — sporting goods and big-box stores.

The news on that front began to improve a year or two ago, and continues to show further gains.

The nation’s dozen-largest sporting goods stores added 144 stores and only closed 15 for a net 129-store gain. Hibbett Sports with 873 locations in 26 states has been the biggest gainer of late, adding 41 stores in 2012 and beating its peers with a 6.9 percent increase in same-store sales for the year.

Dick’s Sporting Goods also reported healthy pickups, adding 38 stores in 2012 with a 4.3 percent rise in same-store sales.

Big 5 Sporting Goods, which was hurt last year by the lack of winter weather — losing wintersports and winter clothing sales — rebounded this year with a 6.5 percent increase in same-store sales, but remained conservative, adding only 8 stores.

Other highlights included expansions for regional business, such as Olympia Sports in the Mid-Atlantic, Dunham’s Sports in the Midwest, Academy Sports and Outdoors in the South and Modell’s Sporting Goods in the Northeast, each growing store counts after holding steady during the recession.

On the mass big-box store level, Wal-Mart remained king in its 50th year, but sales and store additions are slowing, while its main competitors, Target and Costco, continue to grow. Sears and Best Buy are attempting to re-invent their business models for future, the latter doing a bit better of a job than the former.

In Sum
Overall there seems to be a positive vibe among fitness retailers. Though nowhere near pre-2008 levels in store counts, optimism among the industry’s retailers and manufacturers is back and picking up steam.

SNEWS projects continued gains for 2013, possibly even greater than 2012, but we suspect the advances will remain modest as more growth spurs from e-commerce sales, not directly resulting in increased storefronts.

We also look forward to new takes on specialty fitness retail. There’s room to evolve past just selling core equipment. As Leisure Fitness is demonstrating, building a fitness community around its stores is helping. Others are finding ways to embrace CrossFit and similar growing fitness niche categories to take advantage of some extra sales, even if they are small.

Sheriff at Healthstyles summed it up well, “The industry feels like it’s finally coming out of hibernation.”

Click here to download the PDF charts to accompany this story. Access the 2011/12 report here, plus the 2010/11 report here, and the 2009/10 report here

--David Clucasand Ana Trujillo

The small print: Remember, our list of top retailers is only based on store numbers. We recognize that the number of doors a store has may not fully represent how good or how strong a retail brand is or even how high its revenues are. But since it is the only black-and-white-number we have, that’s what we use. If you have any corrections, questions or comments, please contact us at news@snewsnet.com.

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