What a difference a single year can make. Now that most of the pandemic-related restrictions have been lifted across the country, investors have been aiming to take advantage of stocks that stand to benefit from the economic reopening. Whereas last year witnessed a surge in many of the ‘stay-at-home’ names, the beginnings of a return to normalcy have coincided with a surge in industries that were decimated last year.
Gyms were certainly one of the hardest hit businesses in 2020, and it’s easy to understand why that was the case. Their monthly revenues disappeared overnight as gyms were forced to freeze memberships at no cost to the consumer.
Social distancing and other restrictions that were imposed upon the public left zero chance of getting a workout in at the gym for a solid four months in most states. And even when gyms were permitted to reopen, many members were extremely hesitant to return. A survey conducted by Statista Global Consumer showed 46% of respondents were very uncomfortable going back to the gym in the latter half of 2020.
As such, people turned to exercise at home, which led to well-known names like Peloton (
PTON Quick Quote PTON - Free Report) and Nautilus ( NLS Quick Quote NLS - Free Report) skyrocketing in 2020. Last year, it seemed like everyone was buying a spin bike to use in the comfort of their home (I know one ended up in mine). While both Peloton and Nautilus had a stellar 2020, we can see in the chart below that these ‘stay-at-home’ names have reversed course this year, while the more traditional Planet Fitness has held up well. Image Source: Zacks Investment Research
Every fitness advertisement last year claimed that the industry had been changed forever. Yet just like many major cities have seen numbers come roaring back after an initial scare, gyms are also seeing members return. This is an industry that has truly completed the roundtrip.
People are going back to the gym. And while it’s certainly convenient to workout in your own residence, there is simply no getting around the fact that gyms have a much wider array of machines and equipment to help keep people in shape - not to mention extra amenities such as pools, spas and other luxuries.
Let’s take a look at three stocks that stand to benefit from the continued economic reopening.
Lululemon Athletica ( LULU Quick Quote LULU - Free Report)
One could argue that Lululemon has created its own specific niche within the fitness industry. Last year, LULU acquired Mirror, the smart at-home workout machine founded by Brynn Putnam. And while it has been touting Mirror in much of its marketing, the company has built a devout following over the years for its athletic apparel and yoga-related products.
Currently sporting a Zacks #2 Buy rating, a return to the gym has undoubtedly provided a boost to LULU’s core business. The company has seen a rebound in brick-and-mortar sales driven by an increase in store traffic as consumers have become more comfortable shopping in store. In the second quarter, traffic trends increased by over 150% compared to last year. LULU most recently reported an EPS beat of $1.65 back in September, delivering a 36% surprise over consensus and 123% growth over the same quarter in 2020.