As indicated by the typical company data, the demand for fitness centers has taken off since 2016 as indicated by increasing use of fitness from existing members and from new members, which may have been driven by positive changes in macro-economy and demographic factors.

Sector’s Current, Trend, Causes behind trend, and Future

Current and Trend

1. It seems that the demand for fitness clubs/centers in US market has turned into fast growth in the past three years.

2. The increase in demand seems to firstly come from existing members and as well from non-members.

3. Expansion of new centers/stores of companies in this sector accelerates as demand increases.

Causes behind the trend

1. The upward trend in this industry may be consistent with what is happening in other entertainment and leisure industries, which should have been driven by improvement in economy situation.

2. Benefited from general favorable climate in fitness market, companies have been able to adopt more aggressive marketing strategy including largely lowering initiative and processing fees to stimulate potential user of fitness to become member.

Industry Future

1. As upward trend in this industry continues, companies may be able to continue to see growth in their revenue as macro economy recovers gradually.

General Financial Performance of Companies In the Sector

It seems that the demand for fitness clubs/centers of those companies in this sector has become strong in the past three years as indicated by the largely increased revenue in their same store sale (average 6% annually in 2017 and 2018) during the same period. The increase seems to be due to higher average monthly dues per member and, to less extent, to increase in members. The initiative and processing fees decreased due to companies’ business strategy. Companies, benefited from increased same store sales, expand its new store fast (13% annual growth in number of stores in 2017 and 2018).

The increase in demand and thus the increase in revenue (dues) and cost cutting helped largely improved companies’ gross margin. The typical gross margin of companies (including operating costs and depreciation) is about 29% with a large range of 10-50%) in 2018, SG&A as percentage of sales is about 10%, and operating margin is about 20% in 2018.

The typical enterprise price/EBI (adjusted with tax field) ratio is 50.

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