2009/10 SNEWS FitBiz Retailer Report: Has the industry’s face changed … or what?

Now that we’ve gotten past last year’s description of the industry as “dismal,” we have moved finally to glimpsing the tiniest glimmer of hope. Only a tiny bit, of course, but most in the industry will take whatever they can get. Even with that hope on the horizon, the doom and gloom that engulfed the fitness industry in the last two years took its toll on retail, especially at specialty retail.

This year’s annual special FitBiz report by SNEWS covering the state of specialty retail, with lists of top retailers, has moved to the web — for better access and a more convenient read. The charts still exist, of course, so you can find all the lists, addresses, websites and numbers you want, but they are also now a PDF for easy download.

What hasn’t changed is that FitBiz remains the industry’s one and only look at what happened at retail in the last calendar year. And, oh boy, has the face of the industry changed dramatically … or what?

You’ll find a number of long-time and top players MIA. You’ll find a few specialty retailers that have actually popped up onto the list. But most of all, you’ll see a rather huge difference in total numbers. 2009 was a tough year, and on the heels of another tough one in 2008. Despite the recession not being declared until December 2008, the industry knew something bad was brewing in 2007. It was hit hard, very hard, perhaps harder than many industries, but we can’t blame all that on outside forces. Indeed, fitness wasn’t immune to the heady toss-your-head-back-and-laugh-heartily days of economic corpulence in 2006 and the couple of years leading up to it.

Nevertheless, for some, the last two years were ones of regrouping and rethinking business: Blame it on the economy or blame it on any number of other possible factors from growing too fast, mismanagement, not keeping a lid on expenses, or listening to somebody outside your business instead of yourself. Either way, everybody regrouped and most downsized in the last year or two. Some, however, while still in the deep depths, were and still are laying strategy for the upturn so they’d be ready. As one specialty owner told us, “Now’s the time to be doing real estate deals.”

Let’s take a look at who is MIA, who has changed dramatically, and at other major players:

• Fitness Holdings International is, of course, long gone as the owner of Busy Body Home Fitness and Omni Fitness stores that once tallied 120 nationwide.2nd Wind Exercise has dropped to half of its store numbers from two years ago.
• Although run mostly independently, the group of “Home Fitness” businesses overseen by Scott Egbert lost a few doors but, in the scheme of economic times, not significantly since its businesses weren’t growing at the screaming-fast-paced rate of others. It even acquired some of the old Busy Body assets in Northern California and Alaska.The Fitness Group’s holdings of HEST Fitness and Texas Home Fitness in Texas and Precor Home Fitness in the Northeast went quietly dark and slipped away.
• Long-timer Superior Fitness also shut down mid-year, succumbing to financial pressures.

Those are the big changes you’ll see if you compare last year’s FitBiz report covering 2008 (click here to find that March 2009 digital issue) to this year’s five pages of charts.

What you won’t see on the chart are the reports of smaller retailers who closed a door or two (and most did that) or even the small guys who just shut down: Value Fitness in Ohio, Nellie’s and Fitness Select in Southern California (other than one separately owned Nellie’s store), FitChix in Arizona, Hardbody Fitness in Colorado, Creative Fitness/The Fitness Store in the Northeast, and Home Fitness Equipment in Pennsylvania. Those reports are posted ongoing in SNEWS as the news happens. (If you don’t get your own SNEWS, click here to find out more about the subscription options so you can stay up-to-date.)

Shocking numbers
What will shock you are the total numbers now that are represented on our list: When we started counting noses at retail for the 2003 year, we listed what we called a “top” 25 — and some stores who had five or more doors didn’t even make it on the list. That year we had 383 total individual stores run by 25 retail companies. The number continued to grow although we started having trouble filling out a list of 25 by 2005, ending up with 24. (Remember, our list of “top” retailers is only based on store numbers; yes, we recognize that the number of doors you have may not fully represent how good or how strong your retail brand is, but since it is the only black-and-number we have and the only one we can take to the bank, that’s what we use.)

The list reached a peak of 540 stores (still five or more doors) run by 23 retail companies in 2007 — 157 more, or an increase of nearly 30 percent than four years earlier — and, with that last hooray, so started the decline. The next year, for 2008, we only found 435 individual stores run by 22 companies, so we added a few “top” four-store chains that year and ended up with 451 stores and 26 companies.

Are you sitting down? In our current report, for the year 2009, we could only find 299 stores run by 19 separate retail companies that had five or more doors. When we added “top” four-store businesses, we found 24 companies and increased the list to 319.

Apples to apples? Looking at 2009 compared to the peak two years earlier in 2007, looking only at companies with five or more stores, the industry only has just over half the number of doors it used to have — down 45 percent from 540 to 299.

Want to look back at the past reports in the FitBiz issues since March 2004 for your own comparison? Go to www.outsidebusinessjournal.com/magazines, click on “Fitness Magazine Archives” and scroll through to find the spring editions of FitBiz for these annual retail reports.

Not all gloom and doom
Now, it’s not all bad news: In 2009, retail infill in the wake of Fitness Holdings International’s spectacular crash and burn that brought down all the Busy Body and Omni stores, meant gaps for others to fill in. Many of these groups with one to three stores are not on our list: Nevada Home Fitness, Empire Home Fitness, Colorado Home Fitness and Coast Fitness. Total Fitness Equipment, which did jump onto the list this year since in the last 18 months it grew 400 percent (Note: The percent sounds great when you go from one to four stores).

Then, of course, there’s the “new” Busy Body Home Fitness that bought the West Coast assets of FHI and didn’t waste any time re-opening seven stores, as well as folding up into the group Dave Silva’s OC Gym Equipment to bring it to a total of eight stores — slipping immediately into No. 12 on the current list. Others are coming, have already come this year, or most certainly will be coming this year, too. Why? We have had retailers tell us that a little growth may be in the offing later this year. Not much, mind you, since the market and consumers are still a bit gun-shy when it comes to spending money. But the smart ones realize that they need to mark their territories to be ready as the pendulum swings back.

Will the economy ever support what it did for the fitness industry in 2006? Perhaps not. Although that may not really be the question to ask. Perhaps what we should ask is whether the economy was actually ready to support what retailers did open (sometimes pushed by their suppliers, we will be so bold to state) between 2004 and 2006.

Sporting goods and beyond
Sporting goods was not immune, of course. If you look below the specialty listings, we don’t neglect to give you some insights into what’s happening at those stores and a few key mass merchandisers since they influence the fitness retail market. In fact, these non-specialty retailers may become even more vital as some key manufacturers have tried to partner with them, for example, Life Fitness and Dick’s, Precor and Sport Chalet, and Horizon Fitness’ Livestrong brand and Dick’s. In addition, nobody missed Best Buy’s expanded pilot into fitness equipment sales that rolled out for the busy season in 2009. Time will tell how all of these will shake out — and the shaking has, of course, started.

The economic doldrums had sporting goods reeling too: Joe’s Sports (formerly G.I. Joe’s) went belly-up in the spring. Of the 12 on our list, four (three of which were private companies) stayed put number-wise. Only one company (Olympia Sports) actually dropped a few stores but only four of last year’s 183. The others were very modest in their expansions since sales were a bit rattled from sea to shining sea; they grew, but went up anywhere from just a couple of stores to a low single-digit growth in percent of store numbers. Some of the growth was already in the works and had been for years, so in some cases backtracking was not an option.

Of note is that Sears for the first time for the 2009 year since we’ve been tracking retail was not No. 1 on the list of mass merchandisers. Perhaps still weighed down by Kmart or perhaps just overtaken by Wal-Mart, Sears slipped to No. 2. With Sear’s planning more store closures, per company reports, we don’t expect that ranking to change, although other business endeavors could affect its place in fitness.

Will the fitness industry begin to see a true light and not just a glimmer? We expect so, although a bright glow may take another few years. Meanwhile, we hope retailers take their businesses into their own hands, that the industry looks outside itself for retail lessons, and that the industry starts talking to itself more to work together for a broad solution and more consumer outreach. In the end, it’s all about getting folks to work out more.

To download this year’s FitBiz by SNEWS charts of top retailers, what changes they have experienced and some insights about what’s coming, click here.
–Therese Iknoian

Note: Every year we contact several dozen retailers to find out how they have changed and to check in about the current state of retail for them — even many who do not in the end appear on this list. We love to keep up with all the smaller shops, too, so if you are not on our annual email check-in list, please drop a note to myfitbiz@snewsnet.com so we can keep up with you, too!