Is Dick’s Sporting Goods, Inc. (DKS) A Good Fitness and Gym Stock To Buy Now?

We recently compiled a list of the 7 Best Fitness and Gym Stocks to Buy. In this article, we are going to take a look at where Dick’s Sporting Goods, Inc. (NYSE:DKS) stands against the other fitness and gym stocks.

The Fitness Industry: An Analysis

The global wellness market has reached a staggering $1.8 trillion, according to McKinsey. The industry has reached $480 billion in the US alone. 82% percent of US consumers consider wellness a top priority, while those in the UK and China report 73% and 87% respectively.

According to Scott Max, gym memberships are almost half of the fitness industry. Of these, 45% of members are millennials, while 35% are Gen Z. Despite these numbers, today’s fitness industry caters more to the needs of Gen Z. Brands are competing to capture their preferences and behavior. According to NielsenIQ (NIQ) and World Data Lab (WDL), Gen Z’s global fitness spending is projected to reach $12 trillion by 2030.

Under such impressions, Gen Z is called the “Generation Active”. According to Les Mills, 36% of Gen Z are active, while 30% are using fitness facilities. 82% of these are members of gyms or studios, with 72% taking a hybrid approach, training both in and out of the gym.

COVID-19 resulted in the significant closure of gyms and fitness studios, but people are now interested again after the pandemic. Fitness marketplaces like Mindbody ClassPass are now thriving by connecting consumers with studios, gyms, and other wellness providers. It’s a subscription-based platform that allows users to access a variety of fitness experiences with a single membership.

The fitness industry is also seeing new IPOs. According to Reuters, the CEO, Fritz Lanman announced that Mindbody ClassPass is aiming to go public in the next 12-18 months, with Goldman Sachs as its lead banker. The money from the IPO will be used for share buybacks, and buying other businesses. ClassPass, which was acquired by MindBody in 2021, is 65% bigger than pre-Covid, according to Lanman. The overall company, MindBody ClassPass, is projected to achieve a 20% growth in revenue for 2024 (~$500 million).

Good physical strength is associated with mental well-being. Brands can benefit from this focus on physical and mental health and utilize platforms like TikTok to connect with them and offer engaging content. This is especially important for Gen Z, as they spend more hours on their phones as compared to other generations, allowing opportunities for personalized training, and flexible hybrid workout options.

According to Exercise, fitness apps are expected to grow by 21% in the next 5 years. Growing trends of fitness influencers have also positively impacted consumers’ wellness and health intentions. Fitness posts have one of the highest engagement rates on Instagram (~3%).

Gen Z or not, hyper-personalization trends are reshaping how consumers engage with health and wellness. With advancements in technology, individuals seek tailored workouts for their bodies. This shift through apps, wearables, and customized workout plans creates both opportunities and challenges for fitness brands.

Bryan O’Rourke, President of the Fitness Industry Technology Council, said that delivering a customized engagement experience is crucial for retaining members, particularly among Gen Z. Health club members are willing to pay more for a high-value, personalized experience, further driving the growth of boutique studios and small-group training.

According to a McKinsey survey of 5,000+ consumers, AI is a major driver of personalized products and services, where people are using biometrics and gen AI to create customized wellness plans and recommendations. Companies that can offer affordability and clear insights for such services are positioned for success.

The future of wellness is built on science, personalization, and a deep understanding of consumer needs. With the prevalence of weight-loss-assisting drugs, like Ozempic, fitness markets were expected to crash. However, Life Time Chairman and CEO Bahram Akradi says such drugs are only making it easier for people to kickstart their fitness journeys. According to Les Mills, 50% of Gen Z want to exercise regularly but struggle to get started. The availability of Ozempic could drive this generation to surpass millennial gym memberships.

Consumers worldwide are now turning away from unhealthy lifestyles. Investing in fitness stocks offers a compelling opportunity for those looking to capitalize on the growing trend of personalized health solutions. With this context, let’s look at the 7 best fitness and gym stocks to buy now.

Our Methodology

To compile our list, we sifted through ETFs and online rankings to compile a list of 12 fitness stocks. We then selected the 7 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.

At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Dick’s Sporting Goods, Inc. (NYSE:DKS)

Number of Hedge Fund Holders: 34

Dick’s Sporting Goods, Inc. (NYSE:DKS) is the largest American sporting goods retailer, a position that it has held for nearly two decades. It started as a fishing gear shop in Binghamton, New York, and now deals in apparel, footwear, outdoor gear, and sports, fitness, and hunting equipment. It has over 800 stores in the country.

Dick’s Sporting Goods, Inc. (NYSE:DKS) operates 4 subsidiaries – Golf Galaxy, providing golf equipment, apparel, and accessories; Public Lands, focusing on outdoor gear and apparel; Going Going Gone, which gives discounted deals; and House of Sport, a newer concept that brings a wider selection and more high-end brands to consumers.

In FQ1 2024, the company generated $3.02 billion in revenue, beating analyst expectations by $80.33 million, with 6.2% year-over-year growth. The earnings per share also beat expectations at $3.30. Overall, the EPS is up by 262% in the post-pandemic period.

RetailDive reported that since 2019, spending on casual clothing has increased by 22.60% in the US, and Dick’s Sporting Goods, Inc. (NYSE:DKS) casual apparel sales went up by 123.3%. This added over $447 million to the company’s sales. It also has a mobile app, GameChanger, for youth sports, which drove strong sales as over 5 million unique users engaged and averaged 30 minutes per day on it across all sports.

In March, the CFO, Navdeep Gupta, said the company will increase capital investments in external and internal store expansions, and RetailDive reported that it plans to open around 40 locations within and beyond 2024.

In Q1, the company opened 2 “House of Sport” and “next-generation” stores each, and 3 new locations for “Golf Galaxy Performance Centers” were also added. 14 more of the next-generation 50K locations will be opened throughout 2024.

The company has also been closing on-site stores and promoting e-store sales. By Q1, it had a brick-and-mortar presence of 39.4 million square feet, compared to 39.2 million last year.

This is a prominent brand, growing in sales and becoming popular. Over the past 5 years, it has grown at a compound annual growth rate of 33.24%, and it’s likely to continue on this trajectory as management continues executing on the expansion and e-store sales fronts.

Overall DKS ranks 5th on our list of the best fitness and gym stocks to buy. While we acknowledge the potential of DKS as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DKS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.