New Work(out)-From-Home Culture Is Getting Stronger At the Core

As more and more people find themselves working from home, the goal of maintaining both mental and physical fitness has become a top priority for many.

 So how do you stay fit at home? Diet, exercise, cool gear, and tons of virtual workout sessions. LikeFolio scanned the market and identified five companies that can help investors track how the revolution in home-based fitness is “warming up.” 

Not Eating Too Much... and Eating Just Right 

We know that diet and exercise individually can only get you so far. Combine the two and you’re more likely to lose weight and get more fit. Add in the “new” trend of intermittent fasting, and you have a potentially potent remix that turns traditional thinking on its head.

First: eating right. Weight Watchers (WW) shares fell when the company reported an earnings miss on August 4. A lot of the decline had to do with brick-and-mortar location closures.

But on the brighter side, WW ended last quarter with a record level of digital subscribers, according to a WW press release—five million, to be exact. LikeFolio data also shows that consumer demand for a WW plan may be trailing above the investor demand for its shares (see figure 1).

Meanwhile, LikeFolio data is showing an uptick in people who’re looking for a new diet to help stay fit amid pandemic times (see figure 2). It looks to be a combination of the “quarantine 15” aftermath and a continuation of longer-term trends—evidenced by the International Food Information Council’s 2020 Food and Health Survey, which reported:

“An increasing focus on healthfulness over the past 10 years may be linked to a growing number of people who say that they’re following a specific diet—some of which fall squarely in the category of ‘food fads,’ while some have evidence-based staying power. In 2020, 43% say they have followed a specific diet or eating pattern within the past year, an increase from 38% in 2019.”

Meanwhile, the adoption of intermittent fasting (where you reduce your daily eating window to eight hours or less) is surging (see figure 3). This adds up to a potential macro tailwind for WW. How so? Some consumers (a 21% increase over last year) are mentioning practicing intermittent fasting and a digital WW program at the same time. 

How Does Your Fitness Measure Up?

Here’s a basic principle: It’s tough to achieve a goal if you can’t measure it. On the health and fitness side of things, the need for fitness tracking is surging (see figure 4).

Among the fittest players on the field is Garmin (GRMN). According to LikeFolio data, purchase intent mentions for GRMN’s fitness tracker are up 35% year-over-year, with its Fenix product leading its Vivo and Forerunner segments from a growth perspective (see figure 5).

The market for various fitness tracking devices is forecasted to expand upwards of $91 billion by 2027, according to Fortune Business Insights, a corporate analysis firm. Last year (pre-pandemic), the market was already sizable at $30.41 billion.

LikeFolio data aligns with this general projection, although in the near term. According to the data, fitness tracking demand is up an astounding 95%, possibly due to health concerns, more time for home workouts, and the increasing threat of screen boredom.

GRMN shares hit a slump due to an embarrassing data security breach. But shares jumped after the company reported last quarter’s earnings, which showed a revenue increase of 17%.

Should GRMN reinforce its online security measures—as users would reasonably expect—the demand for fitness tracking wearables could continue to gain traction.  

From Work-at-Home to Workout-at-Home

If breathing through a mask can be something of a hassle, try working out with a mask while braving the viral spread among a hundred other sweating bodies. Did that gross you out?

Well, the market will decide. But according to LikeFolio data, many people are deciding the risk and inconvenience might not be worth the price or pursuit. To get a clearer sense of the gym sub-industry, just look at what gym members are largely doing (see figure 6). Gym cancellations have been booming—up 563% year over year.

At the start of the outbreak, Aubree Gordon, an epidemiology professor at the University of Michigan’s School of Public Health, told CNBC that there’s certainly a risk of contracting COVID-19 at a gym. More recently, a Kaiser Permanente infectious disease specialist, Saadia Griffith-Howard, told NPR to “make your own assessment” based on your personal risks when deciding whether to go to the gym.

Sifting through the LikeFolio data, cancellation mentions spiked 272% in just the last month versus last year, while mentions of potential membership purchases are down 43%. That might not bode well for Planet Fitness (PLNT) and other workout chains.

Meanwhile, home has become the new gym (and workplace). Want to join a virtual fitness class where you can work out with your gym buddies? That’s what Peloton (PTON) machines are for, and right now, customer purchase intent is powering up a hill of demand by 384% year over year—and its share price appears to be riding along with it (see figure 7).

PTON’s last earnings report gave us an impressive revenue spike of 66% year over year, beating analyst expectations. Now PTON’s shares are up 61% as it races toward its Q4 earnings just around the corner.

With shares in high gear, does PTON have more room to run? According to PTON CFO Jill Woodworth, yes: “With over 90 million gym memberships across our four current global markets, the U.S., U.K., Canada, and Germany, and only 2.6 million members today, we continue to see a long runway for growth in the coming quarters and years.”

Looking Good While Working Out (at Home)

Feeling comfortable while working out is important. Looking fashionable in the gym while feeling comfy is even cooler, but it may not matter as much in the home gym. So, what’s a fitness apparel company like Lululemon (LULU) to do? Offer virtual interactive training programs.

According to LikeFolio data, customer purchase intent mentions for LULU apparel are up only 9% year over year (see figure 8).

In a comparison that’s pretty much like apples to oranges—or maybe fruit smoothies to protein shakes—demand for virtual fitness training skyrocketed 254% year over year (see figure 9).

So what does one have to do with the other? LULU noted that 86% of its users have virtual fitness memberships. They also noted that more than 50% of the customers who use an interactive fitness program called Mirror happen to be LULU customers.

So LULU decided to dish out $500 million to buy Mirror, which was arguably a huge move—from clothes to calisthenics. Now you can be strong and snazzy. With shares up nearly 15% since its last reporting period, LULU looks to be making a strong transition to digital sales. Considering that 54% of its total revenue last quarter came via e-sales, with its online sales increasing 125% last April, this shift, along with the Mirror acquisition, may help LULU bolster customer demand. We’ll find out when LULU reports Q2 results in September.

The Bottom Line

As people are increasingly working from home in order to limit the spread of coronavirus, the issue of health and fitness has become even more critical. But the “stay-at-home” trend may also disrupt—if not entirely revolutionize—the health and fitness industry. As investors can see in the LikeFolio data on these five companies, finding the favorable or unfavorable side of disruption depends on speed and flexibility—arguably two important measures of corporate fitness, strength, and longer-term health.

Andy Swan is not a representative of TD Ameritrade. TD Ameritrade and LikeFolio are separate and unaffiliated companies. The views and opinions expressed in this article are solely those of the author. Social and consumer sentiment data should not be used alone when making investment decisions. Please consult other sources of information and consider your individual financial position and goals before making an independent investment decision.