David Ross remembers unclipping his foot from a SoulCycle bike in March 2020. The pandemic was about to shut down indoor exercise studios. He finished the class and realized he didn’t know when he would be back again. For Ross, that was a scary thought.
For months thereafter, Ross’ fitness routine consisted of running up and down 31 flights of stairs in his Manhattan apartment building, five or six times a day. He was too afraid to venture outdoors. Coronavirus cases were spreading rampantly across the city last spring.
“At least it felt like I was doing something,” the 36-year-old said. He had been a loyal SoulCycle customer for years, often taking classes in either Tribeca or the West Village.
At one point, Ross rented his apartment building’s gym for solo sweat sessions, where he attempted to mimic an in-studio experience by clipping into a spinning bike, turning off the lights and riding to a SoulCycle instructor’s playlist. He didn’t purchase an at-home bike because he eagerly awaited being able to return in person. Now fully vaccinated against Covid-19, that will soon be a reality, he said.
As SoulCycle welcomes customers like Ross back to classes — indoors, on rooftops and in parking lots — it has a new CEO. Evelyn Webster took over in December, roughly a year after Melanie Whelan abruptly resigned, with the company citing a need for new leadership for her departure.
In Webster’s first 100 days, she has had to work through how to safely bring riders back to classes, and begin the process of fixing what’s been described as a toxic work culture. Webster further faces heightened competition from at-home fitness options, from Peloton‘s cycles to Lululemon‘s Mirror, that have surged in popularity. Meantime, SoulCycle’s parent, high-end fitness brand Equinox Holdings, is reportedly in talks to go public via a special purpose acquisition company, or SPAC.
Webster’s bet is on SoulCycle fans like Ross. While he found a way to keep breaking a sweat through the pandemic, he can’t wait to book a bike in a studio again.
‘What on earth were you thinking’
“People have asked me since I joined, ‘What on earth were you thinking,’ joining basically a boutique fitness business, and a retail business, in the midst of a pandemic?” Webster told CNBC in her first media interview since becoming CEO. “What I knew, is that we wouldn’t be in the pandemic forever.”
SoulCycle’s advantage has always been — and will continue to be — its loyal customers. They are often found in higher-income households that are able to shell out anywhere from $28 to $50 per class for a 45-minute workout. The business also hopes to be able to reach new customers, wherever they are, with the debut last year of its at-home bike.
Prior to joining SoulCycle, Webster was CEO of Guardian News and Media’s international operations. Before that, she held an executive role at Time Inc. and also served as CEO of British publisher IPC Media. In her spare time, her workout of choice was always SoulCycle, which was how she first became introduced to the brand.
“It’s a very strange experience, I will tell you, when you are a pretty seasoned CEO … and you find yourself sitting on a bike going, ‘If I were the CEO here, what would I do?'” Webster said.
“I have enormous admiration for SoulCycle, as a brand and as a business, with my general manager’s hat on,” she said. “But as a rider, I have experienced firsthand the magic of Soul.”
That same experience is what’s drawing longtime customers, like Ross, back to classes. In late March, indoor fitness studios in New York City were given the greenlight to reopen with capacity limits and other safety precautions including wearing a mask.
Ross said he has already attended the chain’s outdoor locations, where no mask is required, including one on a rooftop in Tribeca that features a 360-degree view of New York City on a cloudless afternoon. Some days, the temperature has been less than ideal. But worth it, he said.
“When it was really cold, and I wouldn’t even eat outdoors in that weather … there was something about gearing up and putting the gloves on and just breathing the temperatures, that made the challenge even more rewarding,” Ross said.
“The energy, the spirit of the people — especially as a New Yorker, the day to day is pretty intense — so it just has provided a great 45-minute escape from the world,” he said.
Creating a new culture
In order to make sure riders continue to feel that way, one of Webster’s biggest tasks in the months ahead is fixing the corporate culture at the chain, which celebrated its 15th anniversary on Monday,
Last November, multiple SoulCycle riders and staff alleged that the company enabled toxic behavior, which included sexual harassment and anti-gay and racial discrimination, according to reports by Business Insider. Some of the accusations were of instructors discriminating against a pregnant woman, fat-shaming employees and sleeping with riders, Business Insider said.
“I’ve read quite a lot of coverage coming in,” Webster told CNBC about the allegations. “There’s probably quite a lot of opportunity and work to be done around the culture of the organization.”
The company recently brought on Adwoa Dadzie as its new head of people, to help reset SoulCycle’s culture. Most recently, Dadzie served as vice president of human resources for the marketing, video and entertainment division of Comcast.
SoulCycle is in the midst of holding auditions for new instructors, with participation at record-high levels, Webster said. As these new people join, the company can make sure its values are communicated clearly from the start, she said.
“We frequently talk about how we’re a culture of diversity, inclusion, acceptance and love,” Webster said. “Our riders see that and experience that, but we need to see that, so do prospective instructors and prospective colleagues.”
Addressing the ‘at-home’ risk
In 2015, SoulCycle filed paperwork to raise $100 million in a public offering, which it later withdrew, saying that it no longer needed public capital. Within its S-1 filing with the Securities and Exchange Comission, SoulCycle cited the “home-use fitness equipment industry” as a potential risk to its growth. Likely no one, including SoulCycle, could have predicted how quickly the at-home exercise space would accelerate as Covid shuttered fitness centers and boutique studios.
The pandemic was like lighter fluid on a fire. Those who wanted to keep up their exercise routines needed options, and fast. Many opted to invest in at-home equipment sold by Peloton, Hydrow or Tonal.
In 2020, Peloton’s revenue surged to $1.83 billion from $915 million a year earlier, as people splurged on its high-end cycles, treadmills and Peloton-branded accessories. The company saw so much demand that its supply chain was overwhelmed and shipments were delayed. Peloton went so far as to buy fitness equipment maker Precor for $420 million to help fix production in the U.S.
Peloton’s stock rose with the demand. A year ago, the shares traded under $30, but in January they peaked at $171.09. The stock has since shed more than 30% since the start of the year, however, putting Peloton’s market value at about $30 billion. Investors are increasingly worried that Peloton won’t be able to maintain the rampant growth, as it faces new competition at home as well as in gyms and fitness studios.
Although SoulCycle’s in-studio classes remain core to its business, it’s also now going head-to-head with Peloton in the at-home market. It launched its at-home bike in select markets last March, and went nationwide in the fall. SoulCycle’s bike retails for $2,500, on par with Peloton’s Bike+. Peloton also has a less expensive model for $1,895.
The question is still unanswered: After ponying up cash for a home gym, will people also pay for studio classes in a post-pandemic world?
“We’ve seen this story before in e-commerce,” said Simeon Siegel, an analyst at BMO Capital Markets. “We need to remember stores still represent 70% to 95% of the retail ecosystem, depending on the sector. And fitness is going to be the same thing. The future of fitness is omni … because people still crave the community and crave being in person.”
Celebrating showing up
SoulCycle hopes its classes cannot be replicated. The dimmed lights, the mirrors at the front of the room, the flickering scented candles and the riders decked out in SoulCycle-branded outfits are all notable components to a SoulCycle experience.
“I was off the bike for six months,” said Melanie Griffith, a SoulCycle instructor who is also senior director of brand experience and sits on Webster’s management team to assist with talent development.
“Then I got back on, and it was kind of like there was a light that I didn’t quite know had been turned off, and it got turned back on again,” she said. “People keep sharing that same experience as they come back.”
“People have had a hard year, priorities have shifted, and so there’s really a lot of emphasis on celebrating people for just showing up,” Griffith added.
For those looking to exercise with others, the options have changed. The financial strain of being closed for months has pushed some out of business. FlyWheel and Cyc Fitness liquidated. YogaWorks filed for bankruptcy protection under Chapter 11, but still closed all of its studios. New York Sports Club owner Town Sports and Gold’s Gym restructured under bankruptcy protection.
Piper Sandler recently downgraded shares of Planet Fitness, citing survey work that points toward a softer-than-expected recovery for gyms.
“Our survey results show increasing at-home fitness activity, even for Planet Fitness members,” the note to clients said. “We also see a growing intent for those exercising at home to not return to the gym. Interest in connected home fitness (Peloton, NordicTrack, etc.) remains strong.”
‘Long live outdoor’
The Centers for Disease Control and Prevention has said that Covid-19 has been shown to spread at gyms, fitness classes and studios. In guidance that was last updated in December, the CDC has advised people to make use of fitness facilities with outdoor space, or options for virtual classes, as much as possible. It also asks people to limit high-intensity activities to outdoors.
SoulCycle operates 20 outdoor locations in the U.S. According to Webster, the outdoor classes will likely become a permanent fixture as it’s found that classes on rooftops, at waterfronts, in barns and other open-air venues can stir up excitement from new customers.
“Long live outdoor,” Webster said. “It will continue to be a big part of business as we go forward.”
Earlier this month, SoulCycle opened its first outdoor pop-up studio overseas, in London, outside of a Selfridges department store. Riders wear a pair of headphones to be able to hear the music and the instructor throughout class and to not disrupt the neighbors.
Sixteen indoor locations are open, and that number will grow as pandemic-related restrictions ease. The company hasn’t determined how many studios will remain permanently shut as a result of the pandemic.
“We are anticipating that we will have full studio openings really starting to gain momentum over the summer … and we’re expecting that will continue to accelerate over the next two or three months,” Webster said.
Sales beyond the bike
Finding new and diverse revenue streams will be another top task for Webster.
Given her background in media, Webster said she’s looking to dabble in other types of content. Podcasts and forms of mental health advocacy are two ideas that she has floated. SoulCycle currently has its own radio station on SiriusXM.
“I’m spending a lot of time with the team right now on how we unlock the potential of this brand, and that’s what I have a career of doing in media,” she said. “I bring perspective on brand building and brand growth. That, for me, is the reason it’s so exciting.”
Webster is also exploring ways to grow SoulCycle’s retail business, which she says has held up well during the pandemic with many consumers still investing in activewear. SoulCycle manufacturers its own apparel and accessories, but also sells SoulCycle-branded gear through partnerships with brands like Lululemon and Nike.
For Webster, community is a key part of the brand.
“There will always be a real need to connect with your community,” she said. “And community is SoulCycle’s superpower.”
Community is also what’s drawing riders like Ross back.
“The community of people and the magic of moving in unison with a bunch of strangers, and listening to really fun music, is something that is hard to replicate,” he said. “I might even be going to SoulCycle more [now] than I was pre-pandemic.”
Disclosure: Comcast is a parent company to NBCUniversal and CNBC.