Financials from three equipment manufacturers that show increases in 2010 sales don’t necessarily mean all is back to the good old days, says Stephen Tharrett, president of Club Industry Consulting, Highland Village, TX.
Life Fitness had a 9 percent increase in sales, Precor had a 6 percent increase and Johnson Health Tech, the parent company of Matrix, saw a 25 percent rise in North American sales.
“While these early reports indicate an uptick in sales, they must also be considered in light of the significant sales drops experienced by the majority of manufacturers in 2009, some of 30 percent or more,” Tharrett says. “As a result, while the 2010 trends are definitely favorable, they still reflect sales levels below the peak periods from the middle of the last decade.”
Other suppliers had difficult times in 2010. Tharrett points to Star Trac’s restructuring and Cybex’s $66 million loss in a legal claim.
Bryan O’Rourke, co-founder of consulting company Integerus LLC, agrees that Star Trac’s financial challenges, in particular, probably helped some of the other manufacturers.
“I expect, however, that as Star Trac recovers its footing, the numbers for both Life Fitness and Matrix may be subdued somewhat in the future,” O’Rourke says.
Cybex had not released its fourth quarter 2010 financials as of March 1, 2011. The speculation is that Cybex has yet to determine how best to account for the $66 million claim, which would be a liability on their balance sheet—one that will eventually need to be written off if Cybex does not win its appeal.
“In 2011 we should see the larger companies experience continued growth, though at a slower pace than in the past,” Tharrett says. “With the oversupply of clubs in some markets and reduced spending by most operators, including a considerable slowdown in new store development, we can expect that growth in fitness equipment sales will continue to be a slow climb back to pre-recession levels.”
O’Rourke is a bit more optimistic about club growth and spending, saying, “Expansion among a number of chains is planned for 2011, so I anticipate that numbers will continue to improve.”
Tharrett warns of manufacturer consolidation, saying that the industry is oversupplied by manufacturers. He also expects product advancements from leading manufacturers, which may cause smaller players to leave the business due to low demand for their products.