Peloton (NASDAQ: PTON) closed its cycling studios in March 2020, just like every other fitness center did at the start of the pandemic. But when gym landlords got the all-clear to reopen, Peloton stayed closed. And business has never been better.
In 2019, the fitness industry had hit an all-time high revenue of around $35 billion, but it fell to $15 billion in 2020, a year that also saw the permanent closure of about 17% of gyms because of the pandemic. Peloton and its socially distant, at-home streaming workouts, on the other hand, had a banner year. In Q1 of 2020, it earned $228 million in revenue and leapt to $466.3 million during Q2, likely because so many workout buffs saw the writing on the wall and bought Peloton Bikes and Treads in droves. Revenue continued to climb steadily, and despite a major safety recall on the Tread+, Peloton broke the billion-dollar revenue mark for the first time in Q2 of this year.
This fall, Peloton launched Peloton Apparel, its private-label clothing brand. The company has been selling workout wear for years, but it has always been part of a brand partnership. This time, it's all Peloton, with women's, men's, and gender-neutral selections that will be sold online and in select showrooms. This latest endeavor is likely an attempt to remind Lululemon and its at-home MIRROR workouts who's really at the top of the leaderboard.
Gyms investors should be sweating
Peloton is proof that the fitness industry can do just fine without in-person gyms -- which is bad news for commercial investors. For those who like to combine fitness with socializing, gyms will always have an allure. But with the exception of a swimming pool and sauna or someone handing you a smoothie at the end of your workout (stay tuned?) Peloton has it all: cycling, running, yoga, barre, pilates, dance, strength training, and more. You can literally start your day with a killer workout and end your day with guided meditation to help you fall asleep.
There are, of course, other fitness brands out there that get people moving and shaking at home, including direct competitors like SoulCycle and NordicTrack. But they simply don't command the cache of the Peloton community, where the instructors are stars in their own right. For example, Cody Rigsby is a contestant on this season's Dancing With the Stars. Ally Love is the in-arena host of the Brooklyn Nets. And Jenn Sherman scored a thank you on the acknowledgments page of bestselling author Elin Hildebrand's latest novel. Many other instructors command tens of thousands of followers on social media -- which is also where they model Peloton apparel with links to purchase, of course.
The bottom line
As of the writing of this piece, I do not own any shares of Peloton. But I did purchase a bike six months ago, and I am not exaggerating when I say it's been life changing. Peloton has transformed me into someone who actually likes to exercise. I've become an at-home gym rat. Maybe it's the endorphins talking, but I don't ever again want to exercise anywhere but in the comfort of my own home. And the number of people I see on the leaderboards (where I'm wayyy at the bottom) tells me that I'm not alone.