In UK, gyms emerge as unlikely market winners despite Covid variants     

As lockdowns ease, people are flooding back to their health clubs, while the newly fitness-conscious are signing up in droves, according to preliminary numbers from the UK gym industry. File picture

Packing sweaty, heavy-breathing strangers into enclosed spaces may seem like a disastrous business model for the post-pandemic era. But you wouldn’t know it from the love investors are showing shares and bonds of gyms in the UK.

Gym Group’s shares have jumped about 28% this year, recouping almost all its losses from Covid-19 closures. 

In the bond market, investors have piled into high-yield debt offerings from the budget chain Pure Gym and the more upmarket David Lloyd. 

While the gains are in line with the broader market recovery, gym operators are outperforming companies well-placed to ride any economic rebound from the reopening.

As lockdowns ease, people are flooding back to their health clubs, while the newly fitness-conscious are signing up in droves, according to preliminary numbers from the UK gym industry. 

Pure Gym’s group membership is almost back to pre-pandemic levels, with its paying member base recovering to 91% as of May 9. 

Health club operators in the UK, Europe’s most high-profile gym companies in terms of investor attention, have become strong reopening plays.

“We’re not just seeing people return to the gym, but we’re seeing new members,” according to Harry Barnick, an analyst at Third Bridge, an independent research provider. 

There’s the potential for gyms to actually do better than pre-Covid.” 

While that may be the case, it’s apparent the pandemic has shaken up the landscape. City-centre chains, that did well in the pre-pandemic era, now face an uncertain future as many fearful commuters continue to work from home. 

Budget gyms

Budget gyms with cheap, flexible membership and venues dotted across the suburbs, on the other hand, look set to prosper. The same holds for high-end health clubs offering pampering as well as perspiration.

Take UK budget chain Pure Gym, for instance. The no-frills operator has seen subscriber numbers soar. 

Just over half of its new members had never signed up at a gym before, according to the company’s first-quarter investor presentation. Members are coming to the gym more than they were pre-pandemic, with visits per subscriber per month 10%-15% higher than two years ago.

“Pure Gym is tapping into a real sweet spot at the moment,” said Mark Benbow, a high-yield fund manager at Aegon Asset. 

“People’s interest is being healthy, and yet needing flexibility. Being tied into expensive contracts isn’t appealing to most right now due to the uncertainty of the last year.” 

• Bloomberg