It’s no coincidence that Christmas excess naturally gives way to resolutions of getting fit and fabulous. January is always the month when gyms get a bumper crop of sign-ups. But 2021 was different and whatever happens with Covid restrictions over the next few weeks, 2022 is shaping up in a similar vein.

With fitness worth billions it’s an industry lots of investors gravitate to. But the question this year is which companies might benefit? 

PELOTON’S CRASH

Halfords (HFD) has enjoyed a strong run over the last couple of years and its last earnings update showed bike sales up 8.8% and Peloton became a household name during lockdowns for good reason.

But the latter saw its share price tank this year as sales fell and fitness addicts bored of their own company headed back to the camaraderie and inspiration of a gym setting. And unless you’ve got growing kids or you’re a real cycling nut you only need to buy a bike once.

For many the novelty of an expensive exercise bike faded fast. Those hugely expensive bits of kit often end up doubling as glorified clothes hangers until they find themselves up for sale. Resale marketplace Offer Up said it had seen a 77% increase in sellers since April.

Gyms themselves had begun to recover nicely. A planned stock market listing from Pure Gym earlier this year garnered lots of interest. In the end the float was put on hold after the business secured a big cash injection from private equity – which had clearly scented an opportunity. A similar return to public ownership in October from US-based Life Time has seen shares trading at a steady premium and shares in no-frills offer Planet Fitness have surged.

But clearly there are now big question marks about the trajectory of that recovery. Shares in London-listed Gym Group (GYM) have been volatile following the Government’s Plan B announcement and though a recent trading update highlighted robust membership numbers and restated its expansion plans the boss did admit there was an uncertain outlook.

OPPORTUNITIES FOR THE FUTURE

As a business, like many of those forced to close their doors for long periods of time, Gym Group is carrying considerable debt. But investors need to think beyond the now, particularly when planning portfolio strategy for long-term investments.

While Covid has knocked gyms for six it’s also created huge opportunities for the future. First, it’s made people hyper aware of the need to take care of their health. Second, it’s cleared away some of the chaff and those businesses that remain do so because they are relevant and exciting. Many can and do deliver online programmes.

They’ve got a USP which resonates with their membership and a growing number of people ready to sign up. Working from home has taken a big bite out of many of our social lives and gyms are filling the void for many office workers looking for a new team to play on.

And then there’s the uniform. Athleisure has taken on a life all of its own. Now acceptable attire in the office or pretty much any situation this is big business. Any investor who doesn’t know the name GymShark will want to educate themselves.

It’s taking the US by storm and its boss did admit to sounding out a few banks about a future IPO back in the autumn. Though, as with Pure Gym, a pin has been firmly put in those plans for now, the interest is most definitely still there and still simmering.

MARKS, GET SET, GO

Marks & Spencer (MKS), doyen of the high street, purveyor of underwear and boring basics has simply flown this year and growth in its sportswear brand has played a big part in its resurgence.

Sales of Goodmove activewear were up 50% over the first half of its trading year, a period that has boasted two profit upgrades for the once beleaguered retailer. Frasers (FRAS) similarly has enjoyed a mega turnaround helped by Sports Direct’s successes and JD Sports (JD.) has seen revenues almost double in three years.

Then there are the big boys, Nike and Adidas. Massive brands with global and multi-generational appeal. It seems like the two brands have dominated the trainer space forever. It’s no accident the brands have carefully aligned themselves with some of the most influential sporting stars. Their successes rub off and so does their cool.

Supply chain disruptions have hit both brands hard, however both stocks offering decent dividends and goods that consumers consider must-haves so the brands may enjoy some protection against mounting inflation.

And then there’s the pizzaz. Those huge sporting events that get everybody watching, talking and buying. From the Winter Olympics at the start of 2022 to the Commonwealth Games in the summer and rounding off the year with the football World Cup in Qatar, next year will put sport front and centre.

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