SoulCycle: Its IPO Rides on Reputation

Should the markets ever let up on their resistance, the boutique fitness chain will have to up its speed in attracting customers in advance of its pending IPO.


When a company goes public, my usual response is an editorial one: assigning stories, lining up a social media campaign and thinking of different ways to report on a topic that will be getting heavy coverage. When SoulCycle, the luxury boutique fitness phenomenon, filed July 30 with the Securities and Exchange Commission for an initial public offering, however, I didn’t just take note. I got out of my seat — and into several occasionally uncomfortable ones.

Despite losing nearly 40 pounds in our corporate Weight Watchers program back in 2013, suffice it to say that by last summer I had reversed many of my losses. I had busted my right sacroiliac joint some 20 years prior in eighth-grade track, and 30-something me, unlike teenage varsity-letter-wanting me, wasn’t going to put up with piercing lower back pain. Yet as these things tend to work, 30-something me doesn’t have quite the metabolism of teenage me. Running, my longtime go-to source of cardio, was becoming a less attractive option.

Necessity is the mother of reinvention. It was time to start an exercise regime anew. As SoulCycle, which celebrated its tenth birthday yesterday by offering a set of free rides at a handful of its more than 60 locations, was gearing up to go public, I geared up to find out why. Over the course of several weeks, I went out for rides at several of their studios around New York’s boroughs, plus a suburban location in Short Hills, New Jersey, for good measure.

Since its first location opened on the Upper West Side, the chain has developed legions of fans and detractors. With a new location opening this month in the Houston area, the company operates in nine states plus the District of Columbia, even though 97 percent of its ridership is in New York City, Los Angeles and San Francisco. According to its IPO filing, in 2014 more than 200,000 unique riders clipped in for some 2.5 million turns at its proprietary workout blend of spinning, free-weight-based toning and all the choreography that nondancers can muster while snapped into a spin bike. Riders can burn through 500–700 calories in one 45-minute class and, in 2014, spent some $112 million for the privilege of being affiliated with the SoulCycle brand.

Herein lies the rub: SoulCycle has transcended from exercise phenomenon into a brand name associated with an affluent, urbane lifestyle inasmuch as a workout itself. Write-ups of sample sales of its branded athleisure wear, festooned with its signature yellow spin wheel, are featured alongside those of fashion houses sold in Fifth Avenue department stores. Can’t get to Manhattan’s Garment District for a sample sale over your lunch break? No problem: SoulCycle has struck a deal with Target to feature a diffusion line of its exercise gear at the discount retailer. The company wrote in its IPO filing that clothing and bike sales accounted for roughly 16 percent of revenues in 2014; the remainder came from studio fees. SoulCycle also touts its roster of celebrity clientele. Michelle Obama has taken bespoke SoulCycle classes; a 2012 Vanity Fair article counts Katie Holmes, Chelsea Clinton, Lena Dunham and Kelly Ripa among its fans.

SoulCycle mentioned the word “brand” in its IPO filing 99 times. The filing also touts its celebrity exposure as an asset and a potential business risk: “If in the future we lose such celebrity ridership, this could have a negative effect on our business.”

So how much of SoulCycle is riding on hype? There is a definite snob factor at play: Beyond the celebrity and social media appeal on which SoulCycle banks its business, the workout doesn’t come cheap. In New York, individual classes cost $34 each. In some markets such as San Francisco, the classes are cheaper, whereas in the Hamptons a ride will set you back $40. There’s a discount for buying in bulk, but nevertheless, the savings leave it far from being a budget fitness option.

In fact, SoulCycle’s popular image as a haven for blow-dried sylphs in branded Lycra might be as much a detraction as a draw. I too was skeptical, expecting to be that aerobics class patron: terminally off-step in the mismatched threads I had just picked up from the clearance rack at the sports store down the street. Although SoulCycle’s elitism — however unspoken — gets it publicity, snobbery will send the shyer, more awkward people packing. Here is where the chain’s personal touch pays off. After I signed the requisite wavers and picked up my cycling shoes, the receptionist at the location a block and a half from Institutional Investor’s offices detected a hint of nervousness. “Oh, honey,” he said, waving off my concerns. “It’s a sh*tshow on everyone’s first ride.”

Yet it turned out to be the least embarrassing exercise class I’ve ever taken — enjoyable, even. The workout playlist was so seamlessly put together that it seemed to have been picked by a market research group that was specifically trying to target snarky 30-something writers. The teacher specifically high-fived me for coming to my first class. It lived up to the turns of phrase in its IPO prospectus: “The experience is tribal. It is primal. And it is fun.” And moreover, the class featured a cross-section of young New Yorkers, all there to get a workout that they likely would not have been able to pull off alone with an exercise bike and a Fitbit. Nearly all of the classes I attended — save for a 7:30 a.m. Saturday session in Short Hills — were packed. My classes in Williamsburg also included American Apparel–clad cheerleaders with pom-poms, while at the Upper East Side and West Village locations, my fellow riders in their Bid Day 2014 T-shirts made me feel like a dinosaur.

There is something to be said for not wanting to dog a workout that costs nearly as much as a monthly electric bill. In comparison with that at a gym, SoulCycle’s pay-per-class model holds appeal for people with unpredictable schedules. Case in point: the person who dragged me to an early class in suburban New Jersey, my boyfriend’s sister. A part-time school nurse and a mother of a toddler with another on the way, she lamented her pricey monthly membership at Equinox as often going to waste. (Equinox Fitness’s parent, real estate developer Related Cos., owns 97 percent of SoulCycle.) Rather than a must-do, some riders with whom I chatted see SoulCycle as an occasional treat and expenditure, like a manicure or pedicure. It’s also a 45-minute break from mobile devices.

At the same time, SoulCycle is hardly the only boutique spin class out there. Flywheel, SWERVE and Peloton have developed followings in their own right — and unlike SoulCycle, they offer free water and shoe rental. Although I haven’t tried Peloton, in the course of my thorough workout research, I did sample the first two. Both offer points-based competition depending on speed and resistance used; SWERVE offers a team-based approach, whereas Flywheel lets individuals have their stats posted onscreen under a chosen pseudonym. Notably, the cycling instructor who introduced the two founders of SoulCycle left said partnership to launch Flywheel. Overall, the workout is essentially the same: warm-up, sprint, slow ride with heavy resistance, lightened resistance, weights, spin some more and cool down. Obviously, this formula isn’t hard to crack. SoulCycle, in its IPO, pointed to its awareness of this issue: “Additionally, while we devote considerable efforts and resources to protecting our intellectual property, if these efforts are not successful, the value of our brand may be harmed.”

For the company to continue to expand, it also has to expand its ridership base, one of SoulCycle’s stated goals in its IPO. Yet although people in the Hamptons might be happy to fork over $40 per class in between beach picnics, most of the country doesn’t quite have the same pocket for spin classes. The company intimated in its IPO filing that it has plans to launch a digital at-home service, though that would require would-be subscribers to have a bike — not to mention possibly opening up the fitness class to more imitation, complete with blog posts titled something along the lines of “5 SoulCycle Hacks You NEED.”

Unsurprisingly, the company maintains that it has plenty more room to grow. In SoulCycle-speak, that means “ANYONE can be an Athlete, a Legend, a Warrior, a Renegade or a Rockstar.” In the words of Equinox CEO Harvey Spevak, the SoulCycle “brand is in [such] great demand that we can’t satisfy that demand,” he said on Bloomberg Television Canada. During the same interview, he maintained that market conditions weren’t exactly ripe for an initial public offering. Fair play. Roughly a month after that interview, however, SoulCycle founders Elizabeth Cutler and Julie Rice cashed out of the company, with each founder coming away with $90 million, much of the windfall coming by way of Equinox upping its stake in the spin chain last year. SoulCycle CEO Melanie Whelan, who was formerly the founders’ chief operating officer, remains at the helm, and the two founders remain on the board. The IPO is still pending.

In the meantime, SoulCycle’s stock among its patrons remains up. The free tenth-birthday class I took yesterday evening filled up in roughly one minute. It’s a fair bet that the others went nearly as quickly. Although the price per class might come across as a bit steep to some, the demand is clearly there in their core markets. And since last summer, I’m back down about 30 pounds.

That’s some cost-price effectiveness right there.

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Follow Anne Szustek on Twitter at @the59thStBridge.