First they came for the toilet rolls. Then they came for the yoga mats. Britain’s supermarkets might be the epicentre of panic-buying as Covid-19 fears accelerate. But the country’s sports shops could be the next frontier for scared shoppers.
It’s a situation that could see trade at Sports Direct-owner Frasers Group (LSE: FRAS) grow rapidly.
I visited my local Sports Direct outlet this morning, along with its competitor Decathlon. I was greeted by masses of empty shelves at both outlets, a further reflection of growing public alarm over the worsening pandemic. The latest figures showed an extra 676 confirmed cases emerged on Wednesday, taking the total since the coronavirus outbreak began to 2,626.
Gyms deserted
Sports equipment sales are going through the roof as Britons prepare for the possibility of widespread gym closures. It’s a fate that’s beset other public spaces like cinemas and theatres this week. And it’s feared the government could follow measures by foreign authorities and forcibly close down fitness centres and other major gathering places. Possibly as soon as the weekend. That’s an unthinkable situation for many gym-addicted consumers.
People aren’t waiting for the authorities to step in. An update today from The Gym Group, one of the country’s largest low-cost operators, illustrates how gym bunnies are beginning to avoid such centres in growing numbers. It said that “daily gym usage has started to decrease, new joiner numbers are marginally lower than expected, cancellations are higher and the number of members freezing their membership has increased.”
The Gym Group lost a whopping 21,000 of its members during the first 18 days of March, it said. And as a consequence it said that it intends to slow down its expansion plans.
Sports star
The personal fitness sector is a huge and growing business. According to the most recent State of the UK Fitness Industry Report the total number of gym members in the UK burst through the 10m barrier for the first time in the 12 months to March 2019. The Leisure Database Company study showed that member numbers leapt 4.7% year-on-year in the period.
It’s no wonder that the shelves over at Sports Direct et al are being hastily stripped. Britain’s fitness fanatics are simply finding an alternative to going to the gym and working out at home in large numbers instead.
Frasers Group can expect revenues at its own gym business to fall in the near term. However, it operates just a handful of centres across the whole of the UK. Instead it stands to gain from the sale of expensive and not-so expensive equipment. That means treadmills, dumbbells, running shoes, yoga mats and the like. City analysts expect earnings to rocket 58% in the 12 months to April 2020. This would result in a low forward price-to-earnings (P/E) multiple of 8 times. It’s clearly possible that profits could keep swelling into the upcoming fiscal year too.
