Yahoo Finance Home workouts like Peloton are a pandemic fad: Xponential Fitness CEO
Burning 500 calories on a Peloton bike or other connected device inside your bedroom is proving to be a COVID-19 pandemic fad, argues Xponential Fitness founder and CEO Anthony Geisler.
"I think so," Geisler said on Yahoo Finance Live (video above) when asked if home workouts like Peloton were a pandemic-era fad. "Working out at home has been around forever. I tell people my mom did Richard Simmons 'Sweating to the Oldies' when I was a kid. It's not that working out at home is new, it's just a small part of the pie. And so it got a lot of attention during COVID because people had no other choice but to work out at home."
Geiler added that "we are communal animals. People love to be inside the stores. Our members are back. We'll open more stores this year than ever, have more system-wide sales than ever, and more global units and international expansion. We aren't seeing any slowdown, and we are topping the highs from 2019 so we are happy about that."
The disparity in performance in the first quarter between the publicly traded gym chains and Peloton underscores Geisler's view.
Xponential Fitness — which operates more than 2,200 studios under popular brands Rumble, Row House, and Pure Barre — saw first-quarter North America same-store sales surge 47%. A year ago, sales fell 24%. Adjusted operating profits improved to $14.5 million from $3.6 million a year ago.
The company reiterated its 2022 outlook calling for at least a 41% increase in sales and a 153% gain in adjusted operating profits. It plans to open 500 to 520 new studios mostly under franchise agreements.
Xponential added that it sold 4,684 total franchise licenses in the first quarter alone.
"We remain optimistic as in-person fitness is back and stronger than ever," Jefferies analyst Randal Konik stated about Xpontential in a note to clients. "Average unit volumes are back at peak pre-COVID levels as consumers continue to prioritize health and wellness."
Konik has a buy rating and a $30 price target on Xponential. Shares are currently trading at $14.37.
Low-cost gym operator Planet Fitness, meanwhile, saw system-wide same-store sales increase by 15.9% in the first quarter. Adjusted operating profits rose 77% from a year ago.
Similar to Xponential, Planet Fitness reaffirmed its full-year sales outlook calling for "double-digit" growth.
The vibe exiting the first quarter couldn't be more different for Peloton.
Peloton reported that fiscal third-quarter sales clocked in at $964.3 million, below analyst estimates for $971 million. The company also lost $194 million on an adjusted operating basis, worse than analyst forecasts for a loss of $132 million.
Guidance for the current quarter also brought bad news: The company sees sales of $675 to $700 million, compared to an $820 million estimate from analysts, and an adjusted operating loss of -$115 million to -$120 million — compared to analyst estimates of -$19 million.
The company's performance sheds light on challenges that range from working through excess bike inventory and trying to get customers to pay more for their monthly subscription to getting the expense structure correct after years of profligate spending by prior management.
"Peloton had about as rough a quarter as imaginable," Deutsche Bank analyst Chris Woronka stated in a note to clients. "We believe it is increasingly clear that the only real path forward for the company is to become a mainstream fitness platform that is both relevant and affordable to a much wider swath of the population when compared with the initial Bike and Tread offerings/price points."
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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