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As SoulCycle Preps For IPO, Stats Show Boutique Fitness Isn't Just A Fad

This article is more than 8 years old.

A SoulCycle class in action. Photo: Getty Images.

It didn't take long after SoulCycle announced its public offering on Thursday for the ridicule to commence. And, boy, is the spinning studio an easy target.

It's been satirized on Netflix's Unbreakable Kimmy Schmidt and Comedy Central's Broad City for its cultishness and elitism. Even the New York Times took a swipe, tongue firmly in cheek for a story on the panic that ensued among a certain sort of rich downtown New York denizen when SoulCycle's Tribeca outpost closed for renovations.

This is, after all, a fitness chain charging upwards of $30 for 40 minutes on a stationary bike in a dark, candle-lit room, selling $52 tank tops to its obsessed clientele, and spouting new-agey, self-consciously 'inspirational' jargon -- even in its regulatory filing, which tells of "cardio parties" and a "culture of yes".

What the filing also shows: SoulCycle's formula is working. The 38-strong studio chain is profitable, having made $25 million on $112 million in revenue last year (up from $36.2 million in 2012, a 76% compound annual growth rate).

Last year, SoulCycle sold 2.9 million rides, up from 969,000 in 2012. While it derives 97% of its sales from New York, Los Angeles and San Francisco, it plans to open 10 to 15 studios a year for the next few years in new cities and suburbs -- a risk, as the company admits in its filing. But it's one that could well pan out if research on the growth of the boutique fitness movement nationwide is any indication.

Data from a soon-to-be-published report on the $22 billion U.S. fitness industry by management consultancy Kurt Salmon's retail and consumer division shows the small-box studio format is outpacing the old-fashioned gym .

Revenue, on average, was up 8.5% year-on-year at chains like SoulCycle, The Bar Method, Flywheel and their ilk, where members pay per class, for a 5- or 10-pack or for a pricey monthly pass. At regular gyms, revenue was up just under 2% on average.

Net membership grew 16% year-on-year at boutique fitness studios across the country, versus about 1% for large health clubs, according to Kurt Salmon's report.

The firm is bullish on SoulCycle's opportunities to grow outside New York and California.

"You do not need to teach anybody in Charlotte to get up on a bicycle and pedal to the music," said Bruce Cohen, head of the retail private equity and strategy division at Kurt Salmon.

"There's a buzz coming from the coasts to key cities and suburbs. And why wouldn't this be great in every college town, where people are highly educated, wealthier than average and aware of their fitness?"

Research also suggests that once a SoulCycle rider is on the hook, they return more often and spend far more than their counterparts at regular gyms.

When private equity firm Catterton bought a majority stake in 300-strong ballet barre workout chain Pure Barre in May, they told the Wall Street Journal that boutique fitness attendees work out around 15 times a month and spend around $142 on classes. Compare that to the average gym goer, who works out 10 times and spends $65 a month.

SoulCycle regulars tend to be evangelical about the studio, preaching its message on social media, whether posting ecstatic screengrabs of their front-row bike booking or Instagram shots of their workout buddies decked out in matching $98 Soul-branded leggings.

Among the chain's famous fans: Oprah Winfrey, that most venerable of tastemakers, who spent her 60th birthday on a bike in SoulCycle's West Hollywood studio.

If SoulCycle's IPO proves a success, watch for peers to follow suit and seek cash to expand. Its main competitor in the spin space, Flywheel, actually raised over $108 million in private equity funding in 2014.

It shouldn't come as a huge surprise that Flywheel's biggest investors hail from the fashion industry, including Coach Inc. chairman Lew Frankfort, Theory's Andrew Rosen and Khajak Keledjian of Intermix.

After all, fashion folks know better than anyone the potential of an aspirational product with a slightly new-age bent. The language SoulCycle uses, with its mantras of empowerment, should sound pretty familiar to anyone who's ever set foot in a Lululemon store.

That company has grown to $9 billion (market cap) on the back of $92 black yoga pants. SoulCycle's expansion mission, targeting that very same clientele, shouldn't seem too much of a stretch.

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