In this article, we are going to talk about the 7 best fitness and gym stocks.
The Fitness Industry: An Analysis
The global wellness market has reached a staggering $1.8 trillion, according to McKinsey. The industry has reached $480 billion in the US alone. 82% percent of US consumers consider wellness a top priority, while those in the UK and China report 73% and 87% respectively.
According to Scott Max, gym memberships are almost half of the fitness industry. Of these, 45% of members are millennials, while 35% are Gen Z. Despite these numbers, today’s fitness industry caters more to the needs of Gen Z. Brands are competing to capture their preferences and behavior. According to NielsenIQ (NIQ) and World Data Lab (WDL), Gen Z’s global fitness spending is projected to reach $12 trillion by 2030.
Under such impressions, Gen Z is called the “Generation Active”. According to Les Mills, 36% of Gen Z are active, while 30% are using fitness facilities. 82% of these are members of gyms or studios, with 72% taking a hybrid approach, training both in and out of the gym.
COVID-19 resulted in the significant closure of gyms and fitness studios, but people are now interested again after the pandemic. Fitness marketplaces like Mindbody ClassPass are now thriving by connecting consumers with studios, gyms, and other wellness providers. It’s a subscription-based platform that allows users to access a variety of fitness experiences with a single membership.
The fitness industry is also seeing new IPOs. According to Reuters, the CEO, Fritz Lanman announced that Mindbody ClassPass is aiming to go public in the next 12-18 months, with Goldman Sachs as its lead banker. The money from the IPO will be used for share buybacks, and buying other businesses. ClassPass, which was acquired by MindBody in 2021, is 65% bigger than pre-Covid, according to Lanman. The overall company, MindBody ClassPass, is projected to achieve a 20% growth in revenue for 2024 (~$500 million).
Good physical strength is associated with mental well-being. Brands can benefit from this focus on physical and mental health and utilize platforms like TikTok to connect with them and offer engaging content. This is especially important for Gen Z, as they spend more hours on their phones as compared to other generations, allowing opportunities for personalized training, and flexible hybrid workout options.
According to Exercise, fitness apps are expected to grow by 21% in the next 5 years. Growing trends of fitness influencers have also positively impacted consumers’ wellness and health intentions. Fitness posts have one of the highest engagement rates on Instagram (~3%).
Gen Z or not, hyper-personalization trends are reshaping how consumers engage with health and wellness. With advancements in technology, individuals seek tailored workouts for their bodies. This shift through apps, wearables, and customized workout plans creates both opportunities and challenges for fitness brands.
Bryan O’Rourke, President of the Fitness Industry Technology Council, said that delivering a customized engagement experience is crucial for retaining members, particularly among Gen Z. Health club members are willing to pay more for a high-value, personalized experience, further driving the growth of boutique studios and small-group training.
According to a McKinsey survey of 5,000+ consumers, AI is a major driver of personalized products and services, where people are using biometrics and gen AI to create customized wellness plans and recommendations. Companies that can offer affordability and clear insights for such services are positioned for success.
The future of wellness is built on science, personalization, and a deep understanding of consumer needs. With the prevalence of weight-loss-assisting drugs, like Ozempic, fitness markets were expected to crash. However, Life Time Chairman and CEO Bahram Akradi says such drugs are only making it easier for people to kickstart their fitness journeys. According to Les Mills, 50% of Gen Z want to exercise regularly but struggle to get started. The availability of Ozempic could drive this generation to surpass millennial gym memberships.
Consumers worldwide are now turning away from unhealthy lifestyles. Investing in fitness stocks offers a compelling opportunity for those looking to capitalize on the growing trend of personalized health solutions. With this context, let’s look at the 7 best fitness and gym stocks to buy now.
7 Best Fitness and Gym Stocks to Buy
Our Methodology
To compile our list, we sifted through ETFs and online rankings to compile a list of 12 fitness stocks. We then selected the 7 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
7 Best Fitness and Gym Stocks to Buy
7. Adidas AG – ADR (OTCMKTS:ADDYY)
Number of Hedge Fund Holders: N/A
Adidas AG – ADR (OTCMKTS:ADDYY) is a German athletic apparel and footwear company. It is the largest sportswear manufacturer in Europe and the second largest globally. In 2023, the primary revenue (55%) came from footwear, 38% from sportswear and other apparel, and 7% from accessories.
In October 2022, when the company had $1.3 billion worth of Yeezy sneakers, Adidas AG – ADR (OTCMKTS:ADDYY) had to break off its partnership with Kanye West because of his circulating antisemitic and other offensive comments.
These problems caused an unprofitable 2023, with a net loss of $82.8 million. This was the first occurrence in the past 5 years and caused a loss per share of $0.46. CEO Bjørn Gulden still viewed the company’s 2023 earnings as good given the circumstances.
The sales for footwear increased by 8% in Q4 2023, but apparel sales decreased by 13%. So, marketing investment was increased by 9% in Q1 2024 to build “brand heat”. This was a big step towards boosting brand popularity, and hence consumer demands.
The company earned from a rising trend for low-rise suede “terrace” sneakers – like the Samba and Gazelle. The production of these shoes was increased to help the company deliver strong second-quarter sales for 2024.
In Q2 2024, Adidas AG – ADR (OTCMKTS:ADDYY) generated $6.35 billion in revenue, beating analyst expectations by $308.33 million, with 8% year-over-year growth. Despite the net loss, the company proposed an unchanged flat dividend of $0.76 per share, the same as 2023.
Second-quarter sales rose 9% from a year earlier, resulting in a new higher forecast for operating profit at $1.1 billion. Despite losing this shoe line, Yeezy sales contributed around $163.9 million in revenue.
Global sales are expected to rise by a mid-to-high single-digit percentage, up from a mid-single-digit rate. The company claims it will soon get its old market share back from its competitors.
6. Under Armour Inc. Class A (NYSE:UA)
Number of Hedge Fund Holders: 29
Under Armour Inc. (NYSE:UA) is an American sportswear company that manufactures footwear, apparel, accessories, sports gear, and equipment. It was founded in 1996, by Kevin Plank, a former football captain of the University of Maryland’s special team. It operates stores worldwide, of which 166 are in the US.
In FQ1 2024, the company generated $1.18 billion in revenue, beating expectations but with a 10.12% year-over-year decline, caused by reduced sales of lower-priced merchandise. The earnings per share were $0.01 and beat estimates by $0.09.
In Q1, North American sales declined by 14% due to lower demand for full-price products and reduced sales to discount retailers. D2C also declined because of promotional activity reduction. The company plans to reduce global discounts/promos this year by 50%, especially in North America, instead of spending on promoting digital, wholesale, sports team, and athlete collaborations – like Stephen Curry and the Cavinder twins.
The EMEA region remained stable, with growth in D2C sales, offsetting the decline from wholesale. APAC revenue declined 10% as both wholesale and D2C businesses were down. In Latin America, revenue was up 16%, with growth among regional distributors.
Overall, wholesale revenue for the company was down 8%, D2C revenue declined 12%, and e-commerce declined 25%.
On May 16, RetailDive reported that the company would lay off an unspecified amount of staff to streamline and restructure the business. These cuts will cost the company $70 to $90 million in employee severance among other costs. Under Armour Inc. Class A (NYSE:UA) is also looking for a new CMO, while making improvements and innovations in the global marketing teams, which will increase the company’s presence in Asia Pacific and European markets.
With an established global brand, Under Armour Inc. Class A (NYSE:UA) is a high-quality fitness and gym stock to buy now. Management’s focus on removing unprofitable and underperforming products coupled with cost-cutting initiatives should help the company recover its sales and grow its market share.
5. Dick’s Sporting Goods, Inc. (NYSE:DKS)
Number of Hedge Fund Holders: 34
Dick’s Sporting Goods, Inc. (NYSE:DKS) is the largest American sporting goods retailer, a position that it has held for nearly two decades. It started as a fishing gear shop in Binghamton, New York, and now deals in apparel, footwear, outdoor gear, and sports, fitness, and hunting equipment. It has over 800 stores in the country.
Dick’s Sporting Goods, Inc. (NYSE:DKS) operates 4 subsidiaries – Golf Galaxy, providing golf equipment, apparel, and accessories; Public Lands, focusing on outdoor gear and apparel; Going Going Gone, which gives discounted deals; and House of Sport, a newer concept that brings a wider selection and more high-end brands to consumers.
In FQ1 2024, the company generated $3.02 billion in revenue, beating analyst expectations by $80.33 million, with 6.2% year-over-year growth. The earnings per share also beat expectations at $3.30. Overall, the EPS is up by 262% in the post-pandemic period.
RetailDive reported that since 2019, spending on casual clothing has increased by 22.60% in the US, and Dick’s Sporting Goods, Inc. (NYSE:DKS) casual apparel sales went up by 123.3%. This added over $447 million to the company’s sales. It also has a mobile app, GameChanger, for youth sports, which drove strong sales as over 5 million unique users engaged and averaged 30 minutes per day on it across all sports.
In March, the CFO, Navdeep Gupta, said the company will increase capital investments in external and internal store expansions, and RetailDive reported that it plans to open around 40 locations within and beyond 2024.
In Q1, the company opened 2 “House of Sport” and “next-generation” stores each, and 3 new locations for “Golf Galaxy Performance Centers” were also added. 14 more of the next-generation 50K locations will be opened throughout 2024.
The company has also been closing on-site stores and promoting e-store sales. By Q1, it had a brick-and-mortar presence of 39.4 million square feet, compared to 39.2 million last year.
This is a prominent brand, growing in sales and becoming popular. Over the past 5 years, it has grown at a compound annual growth rate of 33.24%, and it’s likely to continue on this trajectory as management continues executing on the expansion and e-store sales fronts.
4. BellRing Brands, Inc. (NYSE:BRBR)
Number of Hedge Fund Holders: 42
BellRing Brands, Inc. (NYSE:BRBR) is a food and nutrition company that promotes healthy eating through flavorful, nutritious, and convenient packaged goods, such as protein shakes, bars, and powders. All these products are available for immediate consumption. Distribution channels include grocery, drugstores, e-commerce, retailers, and some club stores, like Costco.
In FQ3 2024, revenue was $515.4 million, with a 15.59% year-over-year growth, and EPS was $0.54. Both beat expectations. Consumption grew 10% and accelerated to 20% in July.
The Premier Protein brand recorded an overall 19.8% sales growth. The RTD shakes and protein powder have a strong demand. There was a 9.6% and 43.6% dollar consumption increase in Premier Protein RTD shakes and Premier Protein powder products respectively, as compared to 2023.
The brand Dymatize’s international business increased net sales by 18% in FQ3. However, overall net sales fell by 3%. So most of the loss came from US consumption, which represents ~60% of the brand. Now BellRing Brands, Inc. (NYSE:BRBR) is increasing its investment in marketing and promotion at Dymatize within the US.
BellRing Brands, Inc. (NYSE:BRBR) is expanding product lines. On March 4 and June 17, the company debuted Cookie Dough High Protein Shake, and Premier Protein Pancake & Waffle Mixes. In 2023, it launched 3 new products.
The company has been expanding its production capabilities since FQ3 2023, as indicated by the successful launch of a new greenfield co-manufacturing facility – which meant setting up a new manufacturing facility to increase production capacity. This was done to scale up production to meet the growing demand for protein products.
Wasatch Core Growth Fund stated the following regarding BellRing Brands, Inc. (NYSE:BRBR) in its fourth quarter 2023 investor letter:
“BellRing Brands, Inc. (NYSE:BRBR)) was also a significant contributor. BellRing’s offerings include nutritional shakes, powders, bars and other products primarily marketed under the Premier Protein and Dymatize brands. We like the company’s asset-light operating model, which relies on outsourced production. Given the low cost of BellRing’s products and perceived value among a loyal and growing group of health-conscious consumers, we believe the company has a durable, economically resilient business. Moreover, we think the intellectual property associated with BellRing’s shelf-stable, good-tasting products is relatively difficult for competitors to replicate. Amid the fallout from the Covid-19 pandemic, the company’s production capacity had been severely constrained, impacting revenues and earnings. In 2023, BellRing was able to add new outsourced production facilities—and even more will be added in 2024. Finally, the company and the stock benefited from the proliferation of GLP-1 agonists, such as Ozempic, being used for weight loss. Dieters often consume BellRing’s products in an effort to ingest enough nutrients. That said, the GLP-1 trend wasn’t part of our original investment thesis and isn’t why we continue to own the stock.”
3. Skechers USA Inc. (NYSE:SKX)
Number of Hedge Fund Holders: 45
Skechers USA Inc. (NYSE:SKX) is an American footwear and apparel company that started by designing utility-style boots and is now the third-largest footwear brand in the US. It also makes accessories like hats, sunglasses, bags, and watches, and has nearly 5300 stores worldwide.
In Q2 2024, the company generated a $2.16 billion revenue, $79.35 million less than analyst expectations. Despite a decline in earnings, this revenue marked a sales record, 7.2% higher than the previous year. Domestic sales increased by 7.7%, while international sales (~60% of the total sales) increased by 6.9%.
The sales record was a surprise given currency fluctuations, supply chain disruptions in European shipments, regulatory issues in India causing limited inventory, and low consumer demand in China. This resulted in the company announcing a $1 billion share repurchase plan.
Skechers USA Inc. (NYSE:SKX) made capital expenditures equating to $47.9 million in Q2, in opening new stores and improving D2C technologies. It opened 25 domestic, 98 international, and 194 distributors, licensees, and franchise stores. 12 domestic, 57 international, and 149 distributor, licensee, and franchise stores were also closed.
Rather than venturing into new consumer segments, the company’s COO, David Weinberg, said that there’s a focus on improving planned and existing product lines in the performance athletic market. The company announced the launch of its first soccer/football product in Europe. It also will be moving its basketball target audience to customers other than professional athletes.
Although Chinese sales were lower-than-expected if it wasn’t for the foreign currency fluctuations, the growth in Chinese sales would have almost doubled compared to the reported figures. This shows the company’s growing optimism for the Chinese market, making this one of the best fitness and gym stocks to buy.
2. Lululemon Athletica Inc. (NASDAQ:LULU)
Number of Hedge Fund Holders: 45
Lululemon Athletica Inc. (NASDAQ:LULU) is an American-Canadian multinational company. It started as a yoga wear retailer but soon expanded to other technical athletic wear, lifestyle apparel, footwear, and accessories, and operates 711 stores worldwide. Other than direct B2C e-commerce and in-store sales, Lululemon Athletica Inc. (NASDAQ:LULU) sells through wholesale, warehouses, showrooms, franchises, and temporary locations.
Lululemon Athletica Inc.’s (NASDAQ:LULU) international sales (~21% of total revenue) are growing as the company expands its global presence. In Q1 2024, the company’s international sales grew by 40% year over year, led by its Chinese sales, which grew 52% year over year. Moreover, international same-store sales rose 29%, and Chinese same-store sales grew by 33% year over year.
The company’s biggest market, the Americas, however, is exhibiting flat sales due to issues with bags, apparel sizes, and narrow color ranges. American sales only rose 4% during the quarter. Analysts think the company is losing its brand power under inflation and changing consumer preferences.
Lululemon Athletica (NASDAQ:LULU) is tapping international markets to navigate these challenges. On May 16, Bloomberg reported that the company will acquire its Mexico franchise partner, taking direct ownership of 15 stores. Since Q1 2023, the company added 49 net new stores.
The company managed inventory levels and avoided overproducing during the quarter. In Q1 2024, inventory levels decreased to $1.3 billion from $1.6 billion in the comparable quarter last year. This led to its revenue growing by 10.4% year over year to $2.21 billion, and its EPS coming in at $2.54, ahead of analysts’ estimates of $0.14.
Lululemon Athletica (NASDAQ:LULU) is growing through innovative product launches. By Fall 2024, it will launch a new line of women’s running apparel and accessories, collaborating with a team of female ultramarathon runners. The company will also focus more on training and golf apparel for men.
Lululemon Athletica’s (NASDAQ:LULU) entry into the men’s segment since 2014 has been a success. It expects overall business to grow to $12.5 billion by 2026 by doubling its men’s segment and quadrupling international revenues relative to 2021. The company also launched its first-ever men’s footwear in February 2024, capitalizing on the men’s market. In Q1 2024, women’s sales increased by 10%, men’s by 15%, and accessories by 2%.
Middle Coast Investing stated the following regarding Lululemon Athletica Inc. (NASDAQ:LULU) in its Q2 2024 investor letter:
“I mentioned last quarter and higher above that I like buying quality stocks on sale. Lululemon Athletica Inc. (NASDAQ:LULU), the 2nd worst performer in the S&P 500 this year, qualifies. I published a full thesis on the stock before its most recent earnings, but the basics: the yoga pants and clothing company has had an amazing post pandemic run that is approaching its end. Its growth in the U.S. is slow/non-existent at the moment, but it is growing very fast in China and Europe. I think that international growth is likely to endure, and that its U.S. slowness is likely to be temporary. Lululemon shares are not ‘cheap’, but they are on sale for an average price, and I think the company will grow faster than average over the next five years. I would be wrong if Lululemon is a fad gone bust, or faces a huge post-pandemic hangover as people get used to leaving the house more. We’ll see.”
1. Nike, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 66
Nike, Inc. (NYSE:NKE) is the world’s largest supplier of athleticwear and is well-recognized for sports equipment. The company operates over 1000 retail stores worldwide.
The company generated $12.61 billion in revenue in FQ4 2024, lower than analyst expectations, down 2% year-over-year. For the full-year fiscal 2024, revenue grew around 1% on a currency-neutral basis and earnings per share grew 15%. The company regained the number one position in Korea in women’s lifestyle footwear and made improvements in the Japanese market.
Sales are expected to drop 10% in the next quarter. The company’s CFO, Matt Friend, said that this will be likely due to problems with the company’s e-store, holdback from wholesalers because of the lack of new designs, and lower sales in China because of increased competition and changed consumer preferences.
Nike, Inc. (NYSE:NKE) changed its distribution strategy to make double profits through B2C sales, especially through e-stores, by only keeping retail partnerships with 40 select brands. However this strategy did not work, so it partnered again with some retailers it initially cut out. It also laid off 2% of its corporate workforce in February, equating to 1600 jobs.
The company is expected to improve with the help of its “multi-year innovation program” which will include new products with digital capabilities and technology, and increased speed for concepts to reach the consumer. It’s also planning to invest around $1 billion in consumer-facing activities in 2025.
There is also a focus on new lifestyle products, an example of which is last quarter’s introduction of Dynamic Air, a cushioning technology. At the same time, Nike, Inc. (NYSE:NKE) is reducing the production of some popular products to focus on newer designs, which will temporarily slow down overall growth, but be recovered through new products.
Even with the challenges Nike, Inc. (NYSE:NKE) faces in China or a shortage of new designs, it’s still one of the most premium brands in athletic wear. The company is a reliable and profitable grower, and therefore one of the best fitness and gym stocks to buy now.
ClearBridge Large Cap Growth Strategy stated the following regarding NIKE, Inc. (NYSE:NKE) in its Q2 2024 investor letter:
“Other moves during the quarter included sales of United Parcel Service (UPS) and NIKE, Inc. (NYSE:NKE). Nike has become overly reliant on key platforms, like Jordan, for revenue growth while innovation in areas like running has lagged. Nike could face continued revenue and profit pressure as it invests to re-invigorate innovation and re-position the business back toward wholesale outlets. As such, we are seeking out better ways to participate in the global consumer recovery in companies where earnings estimates have already reset.”
While we acknowledge the potential of NKE to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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