We recently published a list of 10 Best Fitness and Gym Stocks to Buy Now. In this article, we are going to look at where Dick’s Sporting Goods, Inc. (NYSE:DKS) stands against other fitness and gym stocks to buy now.
Overview of the Fitness and Global Wellness Industries
The fitness and wellness industries are projected to be major global players in the coming decades with the world shifting to healthy modes of living. Estimates by McKinsey show that the global wellness market has reached around $1.8 trillion, and has touched $480 billion in the US alone. Around 82% of US consumers rank wellness as their top priority. Similar sentiments can be seen resonating across the globe, as around 73% and 87% of the consumers in the UK and China report the same, respectively.
According to the Health and Fitness Club Global Market Report 2024 released by the Business Research Company, the health and fitness club market has also grown exponentially in recent years. It is estimated to continue on this growth trajectory, going from $92.90 billion in 2023 to $101.46 billion in 2024. Much of this growth can be attributed to an increasing number of apartment complexes offering fitness and gym perks, rapid urbanization, the rising popularity of group fitness classes, government programs promoting fitness and health, and the corporatization of jobs.
Social media influencers also have a major role in this significant mind shift, with many users getting inspired to undertake fitness endeavors and gym memberships to attain the signature “fit body” image. In addition, growth in fitness franchises, personalized training programs, and training plans are also boosting a shift towards fitness and preventive healthcare.
The health and fitness club market size is anticipated to continue growing in the coming decade. The report estimates it to rise at a CAGR of 9.3%, reaching around $144.82 billion in 2028. Some of the significant trends in this forecast include using artificial intelligence for personalized workout recommendations, adopting smart gym equipment, and using AI-powered fitness and health apps.
Gen Z and Millennials in the Fitness Industry
The population aged 20-64 is the largest consumer niche in the industry that has grown exponentially in the past five years. According to Scott Max, gym memberships make up almost 50% of the fitness industry, and around 45% of these members are millennials. Gen Z makes up approximately 35% of this industry. Despite millennials taking the lead in numbers, gym and fitness brands are competing to capture the preferences of Gen Z.
They are altering their business strategies, focusing on contract-free and low-price memberships. According to NielsenIQ (NIQ) and World Data Lab (WDL), the global fitness spending by Gen Z is estimated to reach $12 trillion by 2030. Similarly, estimates by Les Mills show that around 36% of Gen Z is active, while 30% use fitness facilities. Around 82% of these facilities include gyms or studios. However, a significant number also take a hybrid approach, training both in and out of the gym.
The Global Online/Virtual Fitness Market
Owing to these trends, the global online/virtual fitness market is also growing. According to the Global Online/Virtual Fitness Market Report 2023, the industry grew at a CAGR of 39.4%, going from $15.65 billion in 2022 to $21.82 billion in 2023. It is anticipated to continue on this growth trajectory, growing at a CAGR of 36.9% to reach $76.57 billion by 2027.
The primary driver of this growth is the increasing use of mobile phones and smart devices in the fitness industry. With users increasingly relying on their mobile phones and AI-enabled fitness apps to dictate their fitness and gym journeys, this growth trend is expected to persist.
Our Methodology
To compile our list, we sifted through ETFs and online rankings to compile a list of 15 fitness and gym stocks. We then selected the top 10 stocks most popular among elite hedge funds. We sourced the hedge fund data from Insider Monkey’s database. The stocks are arranged in ascending order of the number of hedge funds that have stakes in them as of Q3 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).
Dick’s Sporting Goods, Inc. (NYSE:DKS)
Number of Hedge Fund Holders: 35
Dick’s Sporting Goods, Inc. (NYSE:DKS) is an omnichannel sports goods retailer that serves outdoor and fitness enthusiasts and athletes. It operates more than 850 Golf Galaxy, DICK’s Sporting Goods, Public Lands, Going Going Gone!, Moosejaw, and Warehouse Sale stores. The company carries an elaborate array of national brands, including Columbia, Adidas, Brooks, Carhartt, Hoka, Jordan, Nike, New Balance, and more. The company also operates Dick’s House of Sport, Golf Galaxy Performance Center, and GameChanger.
The company’s fiscal Q3 2024 earnings showed a 4.2% increase in comparable same-store sales. This growth was attributed to its four strategic pillars: deep engagement with the DICK’s brand, differentiated product assortment, omnichannel athlete experience, and knowledgeable teammates. Dick’s Sporting Goods, Inc. (NYSE:DKS) is continuing to invest in its digital and store experience, focusing on increased product knowledge, service, and training to engage with its athletes and customers.
It is also focusing on its expansion strategies. The company opened three Dick’s House of Sport locations in fiscal Q3 2024 and two more in November, bringing the total to 19 open stores ahead of the holiday season. It plans to continue its growth initiatives in 2025 and open around six Health and Support locations. This puts it on track to attain around 75-100 locations by 2027.
Emeth Value Capital made the following comment about DICK’S Sporting Goods, Inc. (NYSE:DKS) in its Q2 2023 investor letter:
“For as often as the phrase “a private equity approach to public markets” is repeated, it is surprising to observe the great divide that exists between even very sophisticated long-term investors in public and private markets. There is perhaps no more well-trodden battleground than that of valuation marks. Public investors, particularly in times of market stress, are quick to express frustration that private equity portfolios are not marked to market. The title of Cliff Asness’ recent opinion piece in Institutional Investor captures the sentiment well, “Why Does Private Equity Get to Play Make-Believe With Prices?”. The level of discontent is surprising for two reasons: first, the difference in methodology is quite easily understood, and second, contrary to public markets gospel, it is evident that liquidity and the discovery of value are in no way synonymous. Indeed, they may be opposing forces more often than not. At the risk of oversimplifying, one can think of private equity marks as single-variable valuations, while public equity marks are dual-variable valuations. Both incorporate the level of earnings in a business, but while multiples are held relatively constant in private equity marks, public market marks also incorporate sentiment in the form of a changing multiple. The problem is that Mr. Market tends to change his opinion quite often. Consider the case of one of our former portfolio companies, DICK’S Sporting Goods, Inc. (NYSE:DKS)…” (Click here to read the full text)
Overall, DKS ranks 5th on our list of one of the best fitness and gym stocks to buy now. While we acknowledge the potential of DKS to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DKS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
