Next is the fitness club play. Everyone that belongs to a gym knows the first week in January is awful because it is so crowded with resolution people. They also know these same people will drop out. The American Council on Exercise reported that 50% of novice exercisers drop out within the first six months. Health clubs expect a 20-30% drop out rate from the New Year's resolution crowd within 90 days.
Town Sports International (CLUB - Get Report) is home to 160 fitness clubs including the New York Sports Club. The stock is up 38% for the past year, but most of that was gained in the beginning of 2012, the last six months has seen the stock slide 20%. On top of that, Town Sports is struggling with a combination of increasing rents and payroll costs, and while they have increased fees competition is fierce.
Low fee players like Planet Fitness offer no frills clubs for $10 a month. Then there's the Cross Fit program which is gaining in popularity. It employs free websites for users who can then go to an affiliated gym. It's a community effort driven through an online presence. It's also focused on low cost to its participants. While four out of five analysts give CLUB a buy rating, the average price target is only $13.75. With the stock currently trading near $10.50, you'd get more performance from a workout than from buying the stock.
One stock that hasn't broken a sweat on its run to all-time highs is Lululemon (LULU - Get Report). Traders keep predicting a stumble for the company, but it hasn't happened yet. Lululemon makes high end yoga wear and its devotees swear by the fit and quality and it's so popular that the core products rarely go on sale. The growth at the company has been nothing short of phenomenal, which is why traders keep waiting for the company to slow. However, they continue to be wrong and here's why.Most traders are men and they don't understand why women are willing to pay a premium for this product. Women, unlike men, aren't interested in wearing an old t-shirt from college and worn shorts to the gym. They want fashion and more importantly good fit from workout attire. They also don't understand that women are still searching for a great fitness bra and Lululemon is working on this. Better a better mousetrap, boys. There have been lots of traders shorting the stock expecting the stock to sell off and it hasn't. The short positions have since begun to unwind.