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Brody Longo works out on his Peloton exercise bike on April 16, 2021 in Brick, New Jersey.

Michael Loccisano | Getty Images

The fitness industry appears headed for a strong holiday season, but not everyone will see a boost.

The category has been on a rollercoaster for more than two years, with the Covid pandemic shifting workout routines and minting new sector winners. Now inflationary pressures and a post-lockdown reset look poised to benefit traditional gyms and trade-down options — threatening connected at-home fitness equipment like the products made by Peloton and Lululemon-owned Mirror.

Inflation remains a top concern for consumers, though October data showed slight easing. Holiday spending projections show that rising costs may result in more muted gift-giving this year.

Demand appears to be stronger for experiences rather than things. The fitness category has a history of surviving pricing pressures, and it usually enjoys a bump from New Year’s resolutions.

“In ’08 and ’09 fitness industry revenues and membership actually ticked up versus much of retail,” Jefferies analyst Corey Tarlowe told CNBC, referring to the financial crisis and recession of that era.

Tarlowe, who covers Planet Fitness and Lululemon, said fitness spending remains steady, even among lower-income, inflation-squeezed consumers. But he sees gyms winning out over more expensive, at-home equipment. People are trading down and shifting more toward value, he said, “and that bodes well for Planet Fitness.”

Return to gyms

Planet Fitness posted record membership and expanded its full-year guidance when it reported third-quarter earnings Nov. 8. The company said it had 16.6 million members at the end of the quarter, an all-time high – even compared to the pre-pandemic era – and said it added 29 new locations during the period.

Planet Fitness CEO Chris Rondeau said members are exercising more, too: six times a month versus five times a month when Planet Fitness went public in 2015. The company also reported a decline in its cancellation rate.

Rondeau said engagement for all age groups is near or above pre-pandemic levels. The company, known for its affordable memberships compared to more luxurious gyms like Life Time and Equinox, boasted strong customer acquisitions through its discounted offerings.

Chris Rondeau, CEO of Planet Fitness.

Adam Jeffery | CNBC

Luxury gyms are seeing positive trends, too. Life Time on Nov. 9 reported a 9% increase in members from 2021, and 4,000 additional members compared with the prior quarter.

The cadence of additions is slower than from 2020 to 2021, but the luxury fitness brand continues to lure its higher-income customer base with in-person experiences such as the increasing popular sport pickleball.

Is fitness on the wish list?

Apparel retailers hope to continue benefiting from the resiliency in fitness.

Lululemon in September showed strong demand for athleticwear from its higher-income consumer base. The company said it was “not seeing any meaningful variation” in consumer behavior despite the macroeconomic environment and actually raised its 2022 guidance range by about $200 million to between $7.87 billion and $7.94 billion.

The company will report its third-quarter results in December.

Other retailers are hoping home fitness will continue to be on wish lists in the coming months. Dick’s Sporting Goods and Lowe’s — which recently expanded its assortment of exercise equipment and accessories — have both touted the stability of the sector, even despite inflation.

But, as Jefferies’ Tarlowe notes, there’s more risk with capital-intensive, lower-margin equipment versus higher-margin products like athleticwear. Nevertheless, retailers like Lowe’s are confident that demand will hold.

“The demand for home fitness equipment has maintained since the pandemic,” Lowe’s executive vice president of merchandising, Bill Boltz, said in a statement to CNBC. “Especially during the holiday gifting season, we are offering an increased selection of fitness accessories in stores.”

Can Peloton peddle bikes?

Luxury at-home products like Peloton, however, have struggled in recent months as consumers get out of the house and back to offices and gyms. The stationary bike maker reported first-quarter results earlier this month that came in well below Wall Street’s expectations, logging a quarterly loss in subscribers and, according to calculations from UBS, a parallel drop in engagement — 16% year over year.

Even as the company looks to drive new customers — selling its Bikes on Amazon and at Dick’s Sporting Goods, launching a rental program and putting bikes in hotels across the country — analysts don’t think the value proposition is attracting more subscribers.

“It took a global pandemic to get from 1 million subscriber to 2 million. Can you actually grow that base?” Arpiné Kocharyan, a leisure, gaming and lodging analyst with UBS, said in an interview with CNBC. “We have seen churn rates double year over year.”

Peloton forecast second-quarter revenue of between $700 million and $725 million, around $150 million below the $874 million that Wall Street had been hoping for, according to Refinitiv consensus estimates at the time of the report.

Lululemon, which acquired at-home fitness company Mirror in 2020 for $500 million, could be facing similar at-home headwinds. Executives did not disclose Mirror sales in the latest quarterly update, but the acquisition remained an expense on the company’s financial statements.

“I just don’t think Mirror was strategically the best option for Lululemon,” Jefferies’ Tarlowe said. “It probably still is dilutive to earnings. They are investing in the business to help enhance the Mirror segment, but I question the value that will actually add overall to the business.”

Mirror subscriptions have been wrapped in Lululemon’s new $39-a-month membership program, which also includes access to exclusive Lululemon products and some in-person workouts. The subscription is part of the company’s five-year plan to double revenue to $12.5 billion by 2025, a plan that has drawn skepticism from some analysts.

“Connected fitness as a phenomenon is here to stay,” UBS’ Kocharyan said. “But are you going to see significant growth rates from where they are today, given that they saw this abnormally high growth rate in the middle of the pandemic? I would say there are more questions about them keeping those subscriptions and engagement high.”