Innovation

SoulCycle’s CEO Ouster Comes Amid More Digital Fitness Offerings

CEO resigns

Fitness is always ripe for disruption in this digital age, and recent events serve to illustrate how the race to win the hearts — and sweat and increased muscle mass and cardio capabilities — of consumes is a fierce one that will command attention in the coming decade.

The news this week comes from SoulCycle, a U.S.-based firm that provides indoor cycling activities for fitness-minded people and is often viewed as a fitness boutique.

CEO Melanie Whelan resigned Tuesday (Nov. 26) after serving in that position since 2015. She also gave up her position on the board. “Both sides felt it was time for a leadership transition, according to a person briefed on the decision who asked not to be named because those discussions were private,” CNBC reported. “SoulCycle’s board and Whelan have come to a mutual agreement in which Sunder Reddy, SoulCycle’s chief financial officer since 2017, will assume the role of interim CEO while the company conducts a search for a permanent replacement. Whelan will stay on to advise the company throughout the transition.”

SoulCycle had planned an initial public offering, but in May 2018 withdrew it because of what the company said was unfavorable market conditions. “When SoulCycle initially filed for an IPO in 2015, the company said it hoped to raise at least $100 million, a placeholder figure, to pay off debt and open studios,” CNBC reported at the time.

SoulCycle is certainly not the only player in the upscale fitness space, or the only player trying to appeal to digitally and mobile-minded consumers eager to improve their health. It does, however, face a tepid market where consumers no longer have to go to a studio and workouts are available on-demand. Peloton is one of those other operators, and it recently had better news about itself, courtesy of its latest financial report, released in early November.

Peloton Trends

Peloton’s revenue increased by more than 100 percent year over year in the fitness company’s first quarter of fiscal 2020, hitting $228 million. Even so, its shares slid roughly 4 percent after that earnings news, according to a report, as investors are apparently impatient about the company’s profitability.

The company’s net loss stood at $49.8 million in the quarter, down from $54.5 million during the same period last year. “Despite the significant investments we are making to grow internationally, scale operations, and enhance our end-to-end member experience, we narrowed our Net Loss by $4.8 million,” said the company in its shareholder letter.

Peloton also said its connected fitness subscribers grew 103 percent to 562,774. The fitness platform now has a total member base of more than 1.6 million. The company’s average net monthly churn rate stood at 0.9 percent, and Peloton reports a 94 percent 12-month retention rate.

The company, which sells fitness equipment such as stationary bikes and treadmills, filed its initial public offering (IPO) prospectus in August. The thought at the time was that while the company’s revenue was increasing, its losses were said to be broadening. Peloton was reportedly the first to combine bikes and treadmills with screens that allow subscribers to take part in fitness classes with others from their own locations. Per past reports, the company aims to enable people to have an at-home workout experience “as physically rewarding and addictive as attending a live, in-studio class.”

News also recently emerged that Peloton has acquired Gossamer Engineering, which has designed devices for Google and Facebook. Bloomberg reported that it is unknown how much Peloton paid for the business, but sources said that on May 16 Gossamer’s engineers in mechanical and electrical engineering, quality assurance, and technical program management joined Peloton, which declined to comment.

Fitness Trends

Those are hardly the only recent moves in the fitness world, especially that part of the industry centered around digital offerings.

During a recent high-energy PYMNTS discussion with Karen Webster, Fritz Lanman, CEO at ClassPass, talked about the value that ClassPass — designed as a one-stop digital shop via which consumers can access gym classes and related programs — brings to the modern health-and-wellness market, and the lessons the company has learned along the way, lessons that can be applied to other operators in the digital realm.

The appeal to an investor and entrepreneur like Lanman? For starters, the health-and-wellness trend keeps gaining steam, and there is little doubt that younger consumers will keep up that work. In addition, data and tech are at such a point that offering digital and mobile alternatives, and options for fitness-related classes, can be done in a seamless way — a way that includes a seamless payments experience, too. Furthermore, consumers are always looking for variety, and for community — something a digital operation like ClassPass can help build in almost a social-media-like way.

Indeed, those are some of the reasons that led Lanman to view ClassPass as worth his money and time — and to become one of its Seed investors very early on. Not only that, but the nature of working out is changing for many consumers.

As the holidays progress, many consumers will eat and drink themselves silly and then make health-related New Year’s resolutions. You can bet that digital and mobile fitness happenings will again be in the news before too long.

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