2011/12 SNEWS FitBiz Retailer Report: Slow but steady rebound underway

The number of U.S. specialty fitness retail stores continued to shrink in 2011, but a silver lining in the figures shows that the reductions were limited to a handful of businesses. For most fitness retailers, it was a year of growth or holding steady.

In its ninth annual FitBiz Retailer Report, SNEWS tallied 301 specialty fitness storefronts (owned by 35 separate businesses) with their doors open at the end of 2011. That represents a 3.5 percent decline in stores from 312 locations (owned by 33 separate businesses) at the end of 2010. To be included on the list, companies had to have three or more locations in the United States. Commercial-only showrooms or by-appointment-only locations were not included.

The good news is that the shuttering of fitness specialty shop locations in 2011 was limited to seven owners, while eight added stores, and 20 held even. And 2012 is off to a good start with another five businesses adding six locations in the first quarter going toward next year’s list.

Taking the opportunity to grow
Adding new stores in 2011, Leisure Fitness grew more than any other retailer on our list.

Andrew Leshik, Leisure Fitness’ director of sales and marketing, said the company originally had intended to open the new stores in 2010, “but there was too much uncertainty with our vendor partners and our competition.” That uncertainty diminished in 2011 and is all but gone to start 2012. “We are trending up another 15 to 20 percent in same store sales again,” he said.

The economy’s uptick also gave confidence to new retailers, such as Chicago-based Fitness Experts. The specialty shop opened three stores out of the gate in 2011, led by Gerad Cassello, Dusty Schlotfeldt and Gary Singleton, formerly with Chicago Home Fitness. After their former employer was purchased by The Great Escape and cut back stores, the trio told SNEWS they saw an opportunity to open a business for “quality vendors looking for a home” in Chicagoland.

In Southern California, Workout World is new to our list after opening a third location in ritzy Beverly Hills. SNEWS has tracked the Australian-based fitness retailer since its 2010 foray into the United States, and co-founder Darren Piggins told us Workout World, a.k.a. WOW, plans further growth. “We have been running a television campaign to make customers aware that we are now setting up stores throughout Los Angeles, which we will continue to grow,” he said, as 2011 came to a close.

Workout World is competing for growth against the likes California Home Fitness, which also added a new store in 2011, its fourth. Both businesses, along with Busy Body Home Fitness, are picking up the pieces in the Southern California market after FHI’s bankruptcy in 2009.

Other fitness retailers told us 2011 was the year to take advantage of real estate deals, either by moving or adding locations.

“There are opportunities in this down market,” Precision Fitness Equipment owner David Aykanian told us. In September, his business added a sixth store in the Northeast. “There’s a lot of retail space available … [creating] opportunities for people who have been in business a long time and know what they’re doing.”

Officials with Fitness 4 Home Superstore and At Home Fitness in Arizona, a market particularly hard hit by the real estate crisis, told SNEWS that while they didn’t add any stores in 2011, they did relocate a few to take advantage of better real estate that became available.

Even Steven
While there were ups and downs in 2011, the biggest trend of the year might be that many specialty retailers held their store count level. It’s likely a welcome respite after three years in a topsy-turvy market. While consumers aren’t spending hand-over-foot by any means, there are signs of interest again, retailers told us. Credit has started to loosen up and fitness in general is getting a boost on all fronts — from an increasing amount of social media and mobile apps to First Lady Michelle Obama’s Let’s Move campaign.

Crossfit equipment sales gained steam in 2011, and cardio continued to be a leader, retailers said. Still lagging were sales of traditional strength equipment. Strong commercial and institutional fitness sales also helped keep many retailers in business.

“We’ve been the busiest we’ve ever been in commercial,” said Albert Kessler, co-owner of HEST Fitness with three locations in Texas. “We’re seeing a lot of corporations adding wellness programs for their employees, especially with the health care law up in the air.”

Steve Kelly, CEO of Bob Block Fitness in Indiana, said he’s still waiting for the economic recovery, but business has been stable enough to keep his store count even at three.

Fitness Expo doesn’t plan to open any new stores, said owner Rodney Rice, because company’s philosophy is “trying to get more customers into fewer stores,” Rice said. “This business is so specialized that when you start spreading out too much with locations it can just kill your profitability.”

Other fitness retailers told us they see growth ahead, but not by adding physical stores. Rather, they plan to grow by beefing up their ecommerce business.

Lingering economic realities
The biggest drop within fitness retail in 2011 came from Fitness Resource, which filed for Chapter 11 bankruptcy in September. The reorganization, which President David Nees told us was needed due to a crush of long-term and expensive leases, led to 14 store closings. Fitness Resource, which had 26 stores in 2009, now has five.

The top two specialty fitness retailers on our list, 2nd Wind Exercise Equipment and Gym Source, shed some stores, three and two respectively, but it wasn’t enough to shake them from their top spots. Gym Source is working on a number of leases to grow again in 2012. Half of the business is on the commercial side, which it operates in the listed states, plus Arizona and other areas. (Editor’s note: In a previous version of our list, SNEWS incorrectly stated that the company had left Arizona. While it has no retail locations there, Gym Source still maintains a distribution center and conducts commercial sales in the state.)

Others who closed a location in 2011, such as within Home Fitness Group and Better Body Fitness of Montana hinted to us that they are looking to make up for the lost location with a new store in 2012.

“2011 was a very difficult year in regards to sales and the economy,” said Steve King, owner of Better Body Fitness of Montana, but he said he wants to reopen his Bozeman location. “We have already experienced an increase in sales and are definitely in a much better position as we move into our slower part of the year. I believe people are feeling much better about the economy and are starting to spend again.”

Chain store rise
Many of the sporting goods and mass retailers selling fitness equipment had a good year. As a group, the sporting goods retail chains on our list increased their store count by 4.8 percent to 3,333 locations.

Hibbett Sports kept its No. 1 spot by adding the most stores — 54 new locations. The national sporting goods retailer, which concentrates on 26 southern and central states, outperformed its peers with same-store sales up 6.8 percent in 2011, showing that its success wasn’t just about new stores. Unlike others in this group, Hibbett benefitted from the mild winter with a focus on athletic apparel and footwear rather than cold-weather items.

Dick’s Sporting Goods, while hurt by the weaker winter, did increase same-store sales by 2 percent in 2011, and officials are bullish heading into the spring with a projected 3-4 percent rise in same-store sales for the first quarter 2012. Dick’s added 36 stores in 2011, which boosted overall sales by 7 percent for the year, and it plans to add 40 new stores this year.

Sport Chalet and Big 5 had a rougher go with winter — same-store sales slipped between 1-2 percent for both companies. Big 5’s addition of eight stores in 2011 didn’t help much, as its overall annual sales, including the new stores, rose less than a percent. Sport Chalet finished the year with one less store, although it continues to see a boost in online sales — up 14.5 percent during this past winter quarter.

Mass retailers, such as Wal-Mart and Target, also had a decent year, but Sears is struggling. Sears’ store count dropped by 45 in 2011 as officials announced plans to close 100-120 stores and sell others. Meanwhile, Wal-Mart and Best Buy officials outlined strategies to increase the number of thier smaller-format locations to drive growth in 2012.

In sum
While the specialty fitness industry may never return its glory days of 2005 and 2006, there’s more than just hope out there to signal the start of a slow but steady rebound. Minus a few hiccups, the figures and trends tell us that 2011 marked the turning point, and barring disaster, 2012 will be a positive year. With interest rates expected to remain low, although hinting higher, we expect a rise in investments, which could include mergers, acquisitions and new stores. Retailers who are involved in commercial and online sales will fare better than most this year, but success there will trickle to the consumer side of the business too.

Click here to download the PDF charts to accompany this story. Access the 2010/11 report here, plus the 2009/10 report here and the entire 2003-2009 archived reports here.
—David Clucas and 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.