April 30, 2019 Issue N°79

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CONTENTS

MAIN STORIES

Basic-Fit reinforcing Dutch leadership with Fitland buy...... Orangetheory Fitness investing in Europe...... Fitness First takes Barry’s into and Austria...... Core Health & Fitness adds to multi-brand strategy...... Life Fitness heading for rapid sale...... Puma doubles intensity in fitness...... Lululemon to quadruple international sales...... Swedish retail investor builds STC gym group...... Pure Gym to spread small box gyms ClassPass launches European blitz...... BRIEFS Soft Briefs: Reebok, Lolë, Gymshark...... Gym Briefs: TrainMore, Ken Group, Crunch Fitness, UFC Gym......

Fitness News Europe is published by Zelus (France) Editor: Barbara Smit [email protected] [email protected] @ All rights reserved. ISNN: 2650-8702 The information published in this newsletter cannot be copied or distributed electronically without the publisher’s written permission.

1 FITNESS NEWS Europe FITNESS NEWS EUROPE - ISSUE 79 Basic-Fit reinforcing Dutch leadership with Fitland buy Basic-Fit intends to reinforce its leadership of the Dutch market with the agreed ac- - ator in the Netherlands. quisition of fitness clubs owned by Fitland Groep, the third-largest fitness club oper

Fitland runs 37 Dutch clubs with over 56,000 members that reported sales in the range of €21 million last year. Unlike the two market leaders, Basic-Fit and Fit For Free, Fitland operates around the middle of the market with monthly membership- prices of up to €50 for larger clubs with swimming pools. Basic-Fit is already the leading player in the Dutch market with about 550,000 mem bers working out at 162 clubs in the Netherlands. The combination would thus form a group of nearly 200 clubs with more than 600,000 members, amounting to more than- 30% of Dutch club members. Started near Nijmegen by Maarten van Kempen, Fitland has received financial sup port in the last years from Jan Zeeman, a Dutch textile retail magnate, and another affluent investor. They own the majority of the shares in Fitland Groep, which runs several Dutch hotels and wellness centers. It previously agreed to offload these facilities to another- party, including four hotels incorporating fitness clubs acquired in the Basic-Fit deal. Hans van der Aar, chief financial officer at Basic-Fit, said that the Fitland clubs re ported positive EBITDA. “In any case we bought them for the potential they have as Basic-Fit. They are all in white spots and will be very profitable with our concept,” said Van der Aar. The buyer said it wanted to purchase all of the Fitland clubs and would rebrand- most of them, while a few would be sold. Amenities such as swimming pools will be removed to implement the full Basic-Fit concept, at the same price points, all proba bly by the end of this year.

RETURN TO CONTENTS RETURN TO Basic-Fit’s managers have learned to transform mid-market clubs into Basic-Fit, as they have done with many of their former Health City clubs. “We expect that about 20% of the members will leave, but many will return and then we will get more,” said Van der Aar. - No longer the sole shareholder, Van Kempen relinquished the leadership in 2017. Theretail chief chain executive’s for hearing seat aids. was taken over the same year by Peter Peters, who pre viously worked for large companies such as Nokia and Philips, and a leading Dutch

“We started by making far-reaching internal changes, to strengthen management, improve processes and marketing, because Fitland had been run like a family firm,” said Peters. “Then we built a business plan for growth, and we had to decide if we should do this alone or with a partner.” The ensuing discussions made it clear that there was plenty of interest to buy Fitland. The fit was apparently most judicious for Basic-Fit, due to Fitland’s locations and some of its contents. “We offer more guidance and we have quite a few group classes, which is an area of interest for Basic-Fit,” said Peters. He will leave the company after- the integration but he is eager to remain in the fitness industry. Basic-Fit has not expanded much in the Netherlands in the last years because it dou

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bled down on expansion in France, but the operator signalled earlier this year that it- wantedisting estate to pick in theup aNetherlands. little more growth in other markets. Fitland was an opportunity to bulk up the Dutch network rapidly with locations that neatly complement the ex

Basic-Fit said that the acquisition price, including the refurbishment and rebranding of the Fitland clubs, would be equivalent on a per club basis to the initial investment- to build a Basic-Fit club. The proposed deal should be financed through existing bank facilities and it’s antici pated to be earnings accretive from next year. The takeover should be finalised in July, subject to completion of the consultation of the works councils of both groups. Van der Aar said the takeover would in no way distract from the operator’s plans to open about 125 clubs across its five European markets this year, because the Dutch- and French expansion teams work separately. The agreement was announced just after Basic-Fit reported that it raised its turn over by 29% to €119.4 million for the first quarter. The Dutch group opened 22 clubs in the three months to form a network of 651gyms in five European countries at the end of March. That’s an increase of 118 clubs compared with the same period last year, while the number of memberships jumped by 19% to 1.96 million. - Basic-Fit’s sales of fitness memberships was up by 29% to €116.3 million for the quarter, due to the larger number of members as well as an 8% rise in average mem bership price to €20.43 for the quarter. - This comes after Basic-Fit raised the annual price of its standard membership price by switching the duration from one month to four weeks, and by launching a premi umthe Basic-Fitmembership app. at just under €30 for four weeks, allowing members to train with a friend. Both memberships include access to all clubs around Europe and free usage of

Basic-Fit said that 25% of new joiners are taking this option, and that over 130,000 friends have joined premium members on their workouts. “Although this limits the growth individual memberships, it does have a clear positive effect on revenue,” said René Moos, the group’s chief executive, in a statement. RETURN TO CONTENTS RETURN TO The Dutch operator closed one club in during the quarter but added 19 in France, three in Belgium and one in the Netherlands. The plans to add 125 clubs this year, on top of the Fitland conversions, compares withphase. 108 openings in 2018. Basic-Fit has 36 clubs under construction and contracts signed for another 37 clubs. More than 250 clubs are in the research or negotiation Orangetheory Fitness investing in Europe

David Long, chief executive at Orangetheory Fitness, says that the company has made it a priority to push its concept in Europe, with more direct investments to reach a target of at least 200 studios in Europe by 2024. “The parent brand is really excited about the prospects in major cities in Germany- and in Paris, to the point where we might just end up doing a joint venture and put in some of our own money,” Long said in Cologne earlier this month, adding that Oran 3 FITNESS NEWS Europe FITNESS NEWS EUROPE - ISSUE 79

- getheory Fitness is forming a team of European field staff to support the growth. The U.S. concept using rowers, treadmills, suspension straps and heart-rate moni toring announced earlier this year that it surpassed sales of $1 billion with over 1,120 studiosinfrastructure at the end to accelerate of 2018. Only the growth.a dozen of them are in Europe so far, but the franchise holder has been holding talks with many more potential partners and is investing in- - As Long explains, at least two roving employees should get started this year to sup portopenings. European franchisees, and to make sure that all aspects of the concept are im plemented properly. They are usually on hand several weeks before and after club-

The field staff will probably be based in Germany, which is a key target for Orange theory Fitness. A first German studio was launched in Lübeck by Jeannine Mickeleit around the end of 2017, and another is opening shortly in Hamburg, which should secure more exposure. However, Long says that Orangetheory Fitness is most eager to seal a wider partnership for the German market. Based on the concept’s trajectory in the U.S. market, it takes at least two or three- clubs in a cluster for openings to multiply. That is what the franchise owner saw in the area of where Orangetheory Fitness got started. With three studios in opera tion, it began to get referrals and many more requests from franchises, which led to a second and larger wave of openings. Long is anticipating a similar scenario in Spain. Its franchisees have two studios in Madrid and Orangetheory Fitness is moving into Barcelona shortly. “We open four or five more in Spain this year, during that process you get more franchises, next year it will probably be ten, as long as it’s operated well,” said Long. Orangetheory is taking time to acquire scale is the U.K., where it has six studios. A- master franchising agreement was sealed last year for the Midlands and the north of England, after another for the south of England. Long said that the growth in the Lon don market was particularly constrained by real estate. The latest European market is Poland, where Maciej Turowski opened a franchise in the Mokotów district of Warsaw, with a target to add three in the Polish capital this RETURN TO CONTENTS RETURN TO year. The “very realistic” European target of 200 studios in five years fits with a global plan to expand to 2,500 clubs with 2.5 million members by 2024, up from 800,000 members at the end of last year. - Long said that Orangetheory Fitness should have about 1,600 locations in the U.S. and another 300 in and by then, with the remaining 600 split rough ly equally between Europe, Asia and Latin America. - The appointment of European support employees fits with Orangetheory’s declared aim to deliver consistently outstanding workouts. That is crucial for the brand, be- cause a large share of its members join upon referrals. Orangetheory works with about fifty agents in the U.S. to ensure that franchisees re ceive proper support around the launch of their studios. Some of this revolves around- very practical issues such as the operational flow in the franchises. “People come in and out at the same time, you have to set them up with heart-rate monitoring, it’s con trolled chaos,” Long explains. Along the way, Orangetheory has developed very detailed insights into habits and requirements that vary from one area to the other. They have informed variations in the set-up of the franchises, down to the size of the reception area. 4 FITNESS NEWS Europe FITNESS NEWS EUROPE - ISSUE 79

“In people are okay being squished into a lobby because that’s the way things are done there, whereas in a rural or suburban location that wouldn’t be the- case,” says Long. The response from European studios so far suggests that the motivation and be- haviour of Orangetheory members are quite similar in both markets. But precisely to grasp subtle variations, the chief executive emphasizes that its sup port staff in European should come from the European market. They will start by Fitnessspending six to eight First weeks in takesthe U.S. to learn Barry’s about the concept. into Germany and Austria

Fitness First Germany is preparing to take Barry’s Bootcamp into Germany and Austria, as part of a multi-brand fitness club strategy under the newly-formed LifeFit Group. - formanceThe strategy training. started taking shape late last year when Fitness First Germany acquired Elbgym, a group of three gyms from Hamburg, focusing on functional and athletic per

Oaktree Capital Management, the majority owner of Fitness First Germany, formed LifeFit to bring the Barry’s license for Germany and Austria together with Fitness First Germany and Elbgym. But Christophe Collinet, chief operating officer at Fitness First Germany, makes it clear that another two or three concepts could be added to the group, one of them probably before the end of this year. Collinet said that a boutique market is emerging in Germany, and Barry’s has what- it takes to drive it. “Barry’s has so many elements that make boutiques successful. A very strong brand, clear positioning and an energetic, unforgettable workout experi- ence,” he said. RETURN TO CONTENTS RETURN TO The first Barry’s Bootcamp in Germany should open in early 2020, and Collinet es timates that there could be three to five across Germany and Austria in the next three years. “The focus in Austria will be on the two biggest cities, in Germany seven to ten cities would be suitable for Barry’s,” he said. The investment suggests that Oaktree is not in any particular hurry to divest Fitness First Germany, as it did nearly three years ago with the sale of its British clubs to the DW Group. In other markets, in Asia and Australia, Fitness First has become part of larger multi-brand fitness club groups, not unlike the platform under construction in Germany and Austria. “With the LifeFit Group we have developed a fitness platform whose brands are leaders in their segment. This segmentation makes it possible to service customers better and support growth,” said Federico Alvarez-Demalde, senior vice president at Oaktree, in a statement. Another reason to continue investing is the improved performance of the Fitness- First gyms in the last two years, under the leadership of Martin Seibold. “Given this very positive development, Oaktree is currently not focusing on a po tential sale of the group, but rather capitalising on further growth opportunities with the LifeFit Group which will eventually lead to a sale in a couple of years’ time,” said 5 FITNESS NEWS Europe FITNESS NEWS EUROPE - ISSUE 79

- Collinet. He and Seibold are both managing directors of Barry’s Bootcamp GmbH. - Fitness First could add a couple of gyms in the next three years, but LifeFit’s devel opment should focus on the other concepts. A fourth Elbgym is set to open in Ham burg in the autumn. There are only a few boutique studios in Germany so far, such as Ride and John’s Bootcamp in Berlin, which is part of the former McFit Group. Barry’s Bootcamp, which offers strength and cardio interval training, with weights and treadmills, has slowly but steadily developed in Europe in the last years. After its launch in the U.K., Norway and Sweden, Barry’s was started in Milan by two investors who are preparing to open another studio in September in the same city. They have- teamed up with Franck Hédin to take Barry’s to Paris in June, as previously reported. Earlier this month Fitness First acquired a majority stake in Profession Fit, a suppli er of fitness programs for corporate customers, to be integrated with MyFitnessCard Coreand MyFitnessVideo. adds This to business multi-brand has not been bundled into strategy LifeFit.

Core Health & Fitness is targeting a turnover of up to $30 million for weights, plates and dumbbells under the Throwdown brand after five years, to complement its multi- brand sales of commercial strength and cardio gear. Core acquired licensing rights for the Throwdown brand in the functional training gear category, as reported earlier this month, while the owners continue to sell gloves,- bags and apparel under the same brand. “There’s the opportunity to scale it and put it into our eco-system that drives tech nology,and sells innovation Nautilus and and Schwinn distribution,” in the explainscommercial Tim market. Hawkins, vice president of global sales and marketing at Core Health & Fitness, which owns Star Trac and StairMaster,

Hawkins said that Throwdown chalked up sales of $3 million to $4 million with its weights, plates and dumbbells, and most of that went to just a handful of customers RETURN TO CONTENTS RETURN TO in the U.S. market. But the brand has recognition that is disproportional to its sales and it appeared logical for Core to buy its way into this category with an established brand. “We’re selling half-racks that need weight plates and we’re making dumbbell racks that need dumbbells,” said Hawkins. “We were able to make a buy that got us a brand straight away and instant recognition.” someThrowdown products is together. situated in Lake Forest, California, just down the road from Core’s innovation center. Before the licensing agreement, they had already started delivering

Throwdown Industries was formed around mixed martial arts, and the functional training gear was added a few years ago. Ted Joiner, who ran the relevant category at Throwdown, is joining Core with other key staff. Hawkins said that Core’s sales remained in the range of $150 million after an uptick of about 2% last year. It came entirely from Asia, with more sales in , and , while the Chinese market was hit by relative economic sluggishness. - Core’s turnover was flattish in Europe, which makes up about 25% of the business. It saw strong demand in Poland, after the launch of a subsidiary became fully op erational last year. Along with its European office in the U.K., the group previously 6 FITNESS NEWS Europe FITNESS NEWS EUROPE - ISSUE 79

opened offices in Germany and in Spain, where demand was weaker last year. Throwdown should benefit from Core’s international distribution as well as its manufacturing capacity in . While the production of Throwdown’s weights and plates is currently scattered between the U.S. and several Asian sites, it should all be brought together to Land America in Xiamen. The factory is owned by Michael Bruno, Core’s owner and chief executive. Core has centralised all of its production in this Chinese plant. The group said late last year that about 50 jobs would be cut at a manufacturing unit in Virginia. It will focus on customisation and continue to operate as a distribution centre. Another change at the end of last year was the departure of Justin Grosz, the group’s president and chief operating officer. The group said he was leaving to pursue other- interests, and he has not been replaced. Among the intended growth drivers for this year are a rower for high-intensity in terval training from StairMaster, and the Free Runner from Star Trac. The innovation in this treadmill comes from the HexDeck System, consisting of an aluminium running- deck supported by proprietary hexagonal polymer suspension. Hawkins said the Free Runner has been eagerly used in the facilities where it was in stalled for trials in San Francisco. “If you talk to runners, they say it feels like running on a Mondo track,” he said. “There’s a little bit of give on the impact, but there’s a nice give-back on the return.” Hawkins suggests that the aluminum makes the product more durable as well, because it disperses heat away from the belt. - Core has also been working with partners such as 4iii and Motosumo to inject more digital technology into its products, as part of its OpenHub strategy. “We never re quire a member or a club to first interface with our software to enable an exchange of data,” said Hawkins. The idea is to make Core’s products compatible with all sorts of Lifeapplications, Fitness without imposing heading its own systems. for rapid sale RETURN TO CONTENTS RETURN TO Another impairment charge of $137.2 million before tax was taken earlier this year on Life Fitness, as the fitness equipment supplier’s owner is preparing for a sale of the company in the weeks ahead. - Brunswick Corporation said in March last year that it wanted to spin off Life Fitness- to focus on its marine business. The group studied a stock market listing for the fit ness company, but made it clear last week that the plans had shifted toward an out right sale, which should be concluded shortly. “We have made significant progress on separation and are very encouraged by the strong level of buyer interest in the sales process,” said Dave Foulkes, Brunswick’s chief executive, in a conference call with analysts last week. - “Consequently, while we continue to maintain our preparedness for spinning the business, we have confidence that we will be in a position to announce a sale of the fit- ness business as expeditiously as possible in the second quarter,” Foulkes continued. Brunswick explained that the impairment charge was taken in the first quarter af ter a “re-evaluation of the fair value of the fitness reporting unit which was informed by significant progress made on the sale process.” The pre-tax impairment of $137.2 million resulted in an adjusted net book value of about $500 million for the fitness business. 7 FITNESS NEWS Europe FITNESS NEWS EUROPE - ISSUE 79

With restructuring, exit, integration and impairment charges of $138.3 million, the- fitness entity reported an operating loss of $139.1 million for the first quarter of this year, compared with profit of $11.0 million for the year-ago period. Even on an adjust ed basis, the operating profit reached just $0.9 million, amounting to a profit margin of 0.4%, down from 5.0%. The performance of Life Fitness has deteriorated markedly in the last years, with an operating profit margin shrinking from 14.7% in 2015 to just 2.2% last year. The entity has already taken several rounds of special charges, mostly relating to the integration of Cybex, which was purchased by Life Fitness more than three years ago. The turnover of the fitness entity declined by another 8% to $225.2 million in the quarter, with declines across cardio, strength and consumer gear. The group’s sales fell by 15.0% to $45.4 million in Europe and by 15.2% to $35.7 million in Asia Pacific. Lower sales to Planet Fitness were blamed for a 5.3% dip to Puma$115.1 million doublesin the fitness entity’s intensity U.S. turnover. in fitness

Puma is widening the reach of its business in women’s fitness gear by splitting it into- two, with distinct ranges and targets for high and low intensity training. - The intensity relates mostly to heartbeat. The low intensity range launched in Eu rope a few weeks ago refers to activities such as yoga, Pilates and barre. High inten sity covers nearly all else, from intense functional training to Zumba and other gym activities. Puma projects that the low intensity range could make up about 20% of its sales in women’s training apparel. But the company insists that it’s not replicating brands such as Lululemon, and instead aligning with Puma’s edgier approach. “We’re about Generation Hustle, moving fast,” said Karin Baust, general manager for Puma’s business unit covering fitness, training and running. “But we have found out that the same young and urban consumer is very concerned about a holistic approach RETURN TO CONTENTS RETURN TO to wellbeing, it’s the counter-balance, the ying to their yang.” Women’s fitness has played a crucial part in Puma’s turnaround in the last years. It continues to outgrow the company, even though the brand as a whole has returned to robust sales expansion and profit margins. - The segmentation enables Puma to dig deeper into the fitness category. “For low intensity you want products that provide support for your muscles, as well as com fort and freedom of movement, and you want to take away any distractions,” Baust explains. She mentions high-waisted yoga pants and some layering for women who- want to cover up a little in the often close proximity of other studio guests. - This contrasts with the high-intensity range, for which key functions include venti lation and thermo-regulation. This range includes footwear with a focus on multi-di rectional movement, intended for running on a treadmill as well as floor exercises. The two ranges are targeting separate retailers, to make sure that they aren’t mixed up. While the high intensity gear is most suitable for fitness and sports stores, the low intensity range is headed for department stores and online customers such as Asos and Zalando. Adriana Lima remains the social media flag bearer for the fitness range, and Puma is considering options for an equally impactful partnership on the low-intensity side. 8 FITNESS NEWS Europe FITNESS NEWS EUROPE - ISSUE 79

- Baust outlined the strategy last week, just after Puma reported a sales jump of 15.3%- to €1,319 million for the first three months of this year. Sales moved up by 4.4% in Eu rope, the Middle East and Africa but demand grew much faster in Asia Pacific, includ ing a sales hike of 40% to 50% in China. With that trend, Puma’s sales are increasingly- balanced between Europe, North America and Asia Pacific. The rise was driven by surging apparel sales, up by 28.6% for the quarter, with train ing and running among the strongest categories. Puma’s operating profit surged by Lululemon27.0% to €142.5 million for aims the quarter. to quadruple abroad

Lululemon is aiming to quadruple its international sales in the next five years, as part of a strategic plan unveiled last week. “We’re at the cusp of an inflexion in our international business,” said Stuart Haselden, executive vice president in charge of international sales, at an investor day in New- York. The yoga apparel brand has already raised its international sales to about $360 mil lion last year, with less than 25% coming from Europe, the Middle East and Africa (EMEA). But Lululemon is targeting an annual average sales increase of over 30% until 2023, with the largest chunk of the expansion coming from China. The international goals are part of a plan aiming to double Lululemon’s online sales and to double the size of its business in men’s apparel, with products such as boxers and running gear. The company announced on this occasion that it intended to move- into the footwear market, albeit without providing details. Haselden reiterated that EMEA is the only regional market where Lululemon re mains unprofitable, adding that it would probably take about eighteen months for the brand to reach breakeven. But he repeatedly praised Gareth Pope, Lululemon’s managing director in EMEA, for “recalibrating and re-tooling” the brand’s regional strategy. Lululemon is gaining recognition, which is contributing to an acceleration of RETURN TO CONTENTS RETURN TO comparable store sales. Among the latest investments in Europe are customised online stores for the French and German markets. The Canadian brand has 21 stationary stores in Europe after- the latest opening in Amsterdam. The plans envisage about 10% to 15% of the group’s earnings to come from interna tional markets by 2023. That suggests a lower profit margin than in North America, which Haselden attributed to complications of shipping and regional adjustments. - Other plans include the launch of travel and office products, a range of personal care products and the opening of an experiential store in Chicago with yoga studios, med itation space and a juice bar.

9 FITNESS NEWS Europe FITNESS NEWS EUROPE - ISSUE 79 SOFT BRIEFS n Reebok has reportedly lost the exclusive right to provide footwear for athletes competing at the CrossFit Games. They will continue to wear apparel from Reebok, but they will be allowed to turn up with footwear from Nike, No Bull, Inov8 or any other brand. Some athletes had been complaining that the exclusive rights attributed to Reebok devalued their potential partnerships with other brands, since they would have to wear Reebok at the event with the strongest exposure in this discipline. The report in Morning Chalk Up comes a few months after Reebok and CrossFit reached a settle- ment putting an end to a lawsuit filed by the organisation last year.

n Lolë has started targeting male customers in Europe with a small offering in its own stores and online. The women’s yoga brand already launched a men’s range in Canada two years ago and decided to take the initiative across to Europe this spring. As previously reported, the brand restructured its European activities earlier this year, leading to the departure of its former managing director for Europe, Géraud Maréchal. Charlie Desclaux is heading up sales and marketing from France.

n Gymshark is reportedly preparing a funding round based on a valuation of £500 million (€580m) for the British fitness apparel brand. The Mail on Sunday reports that Gymshark managed operating profits of £18.1 million on sales of £103.6 million (€120m) in the latest fiscal year, compared with £40.7 million for the year until July 2017. The brand’s results for the next fiscal year are are supposed to be filed today at the latest. The social media savvy company from Solihull, established by Ben Francis and Lewis Morgan in 2012, is said to have teamed up with relatively small investment firms for its funding round.

Retail investor builds gym group RETURN TO CONTENTS RETURN TO around STC in Sweden

- The purchase of a gym group from Östersund is turning STC into another leading player in the Swedish fitness club market, with a clear-cut strategy and plenty of fi nancial resources under the ownership of a Swedish retail investor. STC said earlier this month that it would fully integrate Sportsgym, a group of 20 fitness clubs built up by Peder and Kent-Ove Lind in the area around Östersund and- Sundsvall, in the middle of Sweden. The combination forms a group of 80 clubs with around 90,000 members and annualised sales of more than 300 million Swedish kro- nor (€28.2m). - “Sportsgym runs quality fitness clubs in strong locations that complement our port folio, and the company is managed by talented entrepreneurs,” said Josef Bexell, in vestment manager at Novax. “We’ll be able to build on their network and their assets.” Novax is the investment firm that bought a 55% stake in STC last year through Novax Gym Holding. It belongs to the Axel Johnson Group, which owns multiple retail ventures. They include Åhléns department stores along with concepts ranging from 10 FITNESS NEWS Europe FITNESS NEWS EUROPE - ISSUE 79 homeware stores to pharmacies and fashion shops.

The remaining 45% is owned by Katarina Andersson and her partner, who created STC in 1997 in Kungälv, north of Gothenburg. The entrepreneurial couple continues to run the business, and the deal with Sportsgym provides for engagement from the Lind brothers as well. STC had 46 gyms when Novax came on board, with a target to reach 100 in five years, but that should be reached next year instead. Along with Sportsgym, the group already has ten openings in the works this year, and more next year. The rebranding of the Sportsgym clubs in the next months should be relatively easy, since they work with a comparable concept and key price point of about €40 per month. Sportsgym’s office staff remains in place, to operate as a regional office and to supportSmile for expansion Obama around the country.

Bexell explains that the deal fits with the objectives set by Novax when it started- investing in the gym business last year. Novax was already a minority shareholder in Concept Träningsredskap, one of the leading Scandinavian distributors, which whet ted its appetite for investment in the fitness industry. “There’s a window of opportunity to build and consolidate the Swedish market,” said Bexell. “We know how to scale a business and we can finance all of that, to grow with organic openings and acquisitions.” No wonder that he gets calls with takeover offers on a weekly basis. Novax wants to build the network around the STC concept of offering “best in town”- facilities, with a wide variety of impeccable equipment, enthusiastic and competent staff, and Les Mills classes. That is achieved through consistent investment in all as pects of the facilities, as well as leadership training to make sure that this attitude is- ingrained at all levels of the organisation. “If you know that Barack Obama is coming to your gym in the morning, you’ll prob ably clean the floor one more time, you’ll greet him with enthusiasm and do all you can to make sure he has a great time,” says Bexell. “We want our staff to treat all of our RETURN TO CONTENTS RETURN TO members in the same way.” Andersson adds that the operator prides itself on the mix of its customers. “We have seniors in the morning, business people at lunchtime, younger guys in the evening. We work hard for that diversity because it gives us extra drive,” she said. This strategy is supported by a mix of facilities arranged in clusters. They include full-sized fitness clubs of about 3,000 square meters for the entire family, as well as medium-sized clubs with group exercise training, and smaller clubs of 300 square meters, that are open at all hours without staff. These Xpress clubs function as “service centers” for the larger clubs in the cluster. AllUpselling of the new upside Xpress clubs are equipped with virtual group training gear. -

The resources from Novax should help STC to build on these assets through invest ments in technology. They could be particularly useful to improve the onboarding process, which Bexell describes as one of the few weak spots at STC. - The task of onboarding so far has been left entirely to staff, but STC reckons that members could be accompanied more efficiently with some automation. As an ex ample, messages to members could be targeted more sharply if the operator had all 11 FITNESS NEWS Europe FITNESS NEWS EUROPE - ISSUE 79

- relevant details about their objectives and preferences in its system. Among the competencies added by Sportsgym are the ability to upsell more prod ucts. The Lind brothers have implemented functional training areas in their clubs, which require the payment of an extra fee. STC has just started upselling with The Trip, the immersive indoor cycling class from Lesprice Mills, list and which stimulate has been upselling. installed at its flagship club of about 4,000 square meters in Kungälv. It could implement some of the same tactics as Sportsgym to diversify its - Personal training is another area with plenty of potential for development at STC. Themodels. operator has spent much of the last months studying ways to raise the propor tion of members using personal trainers, with a variety of employment and payment

“We want to build personal training for all members at STC, not just the affluent guy who trains several times per week,” said Andersson. “If I could get the mother with three children to take a PT session once per month, that’s just as important for me. That means we need personal trainers who understand all sorts of people.” - The next regional push has started in Skåne province, in the south of Sweden. STC bought three clubs from L9 Fitness and another in southern Sweden through a Sports- gym affiliate. The operator has Stockholm in its sights as well. As Bexell explains, the group’s tar get to achieve country-wide coverage will inevitably take it to the Swedish capital – Pureand the investor Gym is clearly to chuffed spread about the plans. small box gyms

Small box gyms should support sustained expansion for Pure Gym again this year, as the leading British budget club operator is using its downsized format to take up- empty retail sites. Pure Gym raised its sales by 15% to £228.4 million (€264.9m) last year, and its EBIT RETURN TO CONTENTS RETURN TO DA moved up by 14% to £73.1 million (€84.8m). The number of Pure Gym members jumped by 9% to 1,012,000, excluding six out of the ten Soho Gyms purchased last June, which have yet to be rebranded. With 26 organic openings and the conversion of four Soho gyms, Pure Gym ended- thetention year of with slowing 222 clubs.down. This means that the operator accelerated its expansion with 30 extra gyms, compared with 20 added clubs in 2017, and it apparently has no in

The target has been set at another 30 to 33 clubs this year, including seven small box gyms and excluding the six Soho gyms that have yet to transformed. The program is- already well underway with 13 clubs added so far. Smaller formats have been opened by budget club operators across European mar kets in the last two years to reach out to smaller cities or to fill gaps in their network. But the surge in retail store closures in the U.K. is making it easier for operators in the country to find suitable locations. - “Pure Gym has a strong property pipeline and is well placed in the current retail environment to benefit from the increasing number of vacant premises, with the in creased footfall of a Pure Gym site providing benefits for both landlords and retailers,” said Humphrey Cobbold, Pure Gym’s chief executive, in a statement. 12 FITNESS NEWS Europe FITNESS NEWS EUROPE - ISSUE 79

While its standard gyms are about 1,400 to 1,900 square meters, Pure Gym opened fourtheir clubsroll-out. with sizes of about 460 to 740 square meters. The group said they have been well received by members and landlords, which is encouraging it to accelerate

Pure Gym remains the third-largest European operator in membership numbers, far behind McFit and Basic-Fit. The gap between the two British market leaders has been slightly reduced, since The Gym Group added 117,000 members last year. This compares with 85,000 for Pure Gym, which remains comfortably ahead. Average revenue per member per month increased by 2.2% to £18.38 last year. The rise was driven by extras such as Yanga sports water, which was launched at Pure Gym last year. Another large-scale project finalised in 2018 was the introduction of a new mobile app. The average EBITDA of Pure Gym’s mature sites increased by 6.2% to £519,000. The adjusted EBITDA margin per site firmed up by 0.4 percentage point to 45.0% for the year. - The ten year-old operator was divested by CCMP Capital and acquired by Leonard Green & Partners in November 2017 for £308.2 million (€357.4m) and the elimina tion of debt worth £355.9 million (€412.7m). Two months later Pure Gym launched a- bond issuance worth £360 million (€417.5m). Separately, Pure Gym said that Dina Asher-Smith has become an investor and am bassador for the fitness club brand. A female British sprinter who won three gold medals at the European athletics championships last year, she joins the cyclist Chris ClassPassHoy as a Pure Gym partner. launches European blitz

ClassPass has started a blitz on European markets in three countries, with a target to reach more than 30 cities across Europe by the end of the year. - It started in the Netherlands last week with a launch in Amsterdam, Rotterdam, The RETURN TO CONTENTS RETURN TO Hague and Utrecht. Next up are Berlin and Munich, where ClassPass will become ac- tive later this week, ahead of its launch in Paris around the middle of May. “We are fast-tracking our European expansion, it’s all happening,” said Rebecca Wik man, international marketing manager at ClassPass. The next step should take the- aggregator to Scandinavia, Spain, Portugal, Italy, Ireland and a few more British cities. Wikman is based in London, where ClassPass has established its international of fice, under the leadership of Chloe Ross since last year. It has eagerly tucked into the funding of $85 million raised in July last year, precisely for the purpose of accelerating its international expansion. ClassPass started by targeting a spate of Asian markets, and added extra impetus- behind this drive in January by acquiring Guava Pass, a leading regional player. In the last months the focus has shifted to Europe, where it has taken a more local- ised approach, starting with the launch in both Dutch and English in the Netherlands. “All the marketing comms that you see, throughout booking and the customer jour- ney, from start to finish, will all be translated for the first time,” Wikman explained. - Another distinctive aspect of the European approach is that it will put more empha sis on corporate customers. ClassPass started out as a consumer brand, but its cor porate program has taken off with customers such as Facebook, Morgan Sttanley and 13 FITNESS NEWS Europe FITNESS NEWS EUROPE - ISSUE 79

Adidas, pitting it more squarely against Gympass. The aggregator said that “Europe proves to be another exciting landscape for corporate, and we have a new found focus on this with a growing team now based in London.” Among the Dutch studios on offer are Saints & Stars, Great Studios and White Door Studio as well as HealthCity’s full-service gyms. The prices for Dutch consumers vary from €29 to €79 per month, allowing users to take up to 20 classes in the period. ClassPass competes directly with Dutch providers led by OneFit and FitSociety. In Germany it will come across rivals such as Urban Sports Club, which has embarked on a European expansion drive as well. Strongly established in Germany, it has moved into France, Italy, Spain and Portugal, after a fundraise led by Partech in October. Among its most recent markets are Lyon, Bordeaux and Lisbon. ClassPass has opened regional offices in Amsterdam, Munich, Berlin and Paris, and it has started appointing country managers in each of the markets. Wikman said the- company intends to open offices in all capitals of the European countries where it operates. The expansion teams have moved ahead with such alacrity that they sur passed 1,000 studios across European markets this week. A key argument is that ClassPass “drives growth by unlocking new revenue streams,”- the company argues. It boasts that partners who take advantage of dynamic pricing with Smart Rate, its proprietary algorithm, raise their reservation volume by an aver- age of 25% to 35%, and their average sales per schedule rise by 10% to 15%. “ClassPass has created spot fill technology that protects the spots studios fill direct GYMly, opening onlyBRIEFS the ones that would otherwise be empty,” it adds. n TrainMore is moving ahead this summer with the launch of an upmarket studio concept that is open at all hours, near the Vondelpark in Amsterdam. TrainMore’s clubs are most famous for offering a €1 rebate to its members for each of their work- outs. TrainMore Non-Stop will allow them to train more flexibly, in a high-end décor and using smart technology. They will check into the club digitally, book their small group training through an app, and take part in live-streamed cycling classes. Marjoli- RETURN TO CONTENTS RETURN TO jn Meijer, TrainMore’s co-owner, says that the ambiance should be akin to that of the TrainMore Black Label studios. The project comes a few months after TrainMore, Club Sportive and High studios formed the Urban Gym Group, which obtained funding of at least €16 million. Next up is a move into Belgium, starting in Antwerp.

n CMG Sports Club has confirmed that a takeover offer led by the Ken Group has been approved by its board, adding that the deal should be finalised around the middle of May. As reported earlier this month, the Ken Group has teamed up with Accor, a large- scale French hospitality group, which has taken a minority stake in the venture. The Ken Group consists of three exclusive Paris clubs, Ken, Klay and Blanche, owned by the Benzaquen family. They have pledged investment to spruce up the 21 clubs owned by CMG Sports Club in and around Paris, with about 42,000 members. The former market leader in Paris has come under pressure from younger and cheaper concepts, such as Fitness Park and Neoness. The majority owner since June 2016 is LFPI, an investment fund, with another 18% in the hands of Club Med.

14 FITNESS NEWS Europe FITNESS NEWS EUROPE - ISSUE 79 n Global Fitness Ventures, the master franchisee for Crunch Fitness in Iberia, has struck an agreement with a group of investors to open five gyms in the Lisbon area. Along with its partnership with Crunch Fitness, Global Fitness Ventures has a licens- ing agreement with Cristiano Ronaldo to use CR7 as a brand for its fitness clubs. It has two own clubs trading as CR7 Crunch Fitness in Madrid, where Ronaldo previously played, and is holding talks with prospective franchisees in Spain, where it estimates the potential at more than 30 clubs in three years. The Lisbon investors will predict- ably use the reference to the Portuguese football star on their clubs. The group in- cludes specialists in fitness and retailing, among others. Separately, Global Fitness Ventures is holding talks with potential interested parties in Italy, where Ronaldo is now playing.

n The Russian Fitness Group, the company behind the upscale World Class fitness clubs in Russia, has agreed a deal with UFC Gym to open up to 55 clubs in the country. This comes a few months after the operator obtained support from a consortium led by the Russian Direct Investment Fund (RDIF), Russia’s sovereign wealth fund, and the Mubadala Investment company from Abu Dhabi. They have taken over a stake of 22.5% in the Russian Fitness Group, which was previously owned by VTB Capital (read FNE#71). RDIF was already involved with UFC Russia. The Russian Fitness Group has most recently diversified with several studio concepts in Moscow, a franchising part- nership with People’s Fitness in Latvia and another with Rixos Hotels. It has allowed the World Class brand to spread to Turkey, with another project in Dubai. RETURN TO CONTENTS RETURN TO

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