Gymshark makes 95% of its sales online. So why is it investing in physical spaces?

I’ve spent over 16 years working in eCommerce, much of it pure play, and I think we grossly underestimate the commercial value of physical spaces. It’s easier to look at what we can track through clicks and weigh it up as money out, money back. So when profit gets thin, the stores, the events - the moments where customers actually encounter your brand in person - are usually the first thing to get cut.

This has always felt backwards to me. After all, every product ends up being sold to a living, breathing human who’ll have a very real, tangible experience. It feels particularly short-sighted now, because the more AI-generated content there is online, the harder it is for customers to know what’s real. In a DoubleVerify and YouGov survey of 2,000 UK consumers this summer, 92% said AI-generated content is making information online harder to trust. In person, there’s no question.

This whole online/offline conversation is why Gymshark’s latest accounts are so interesting. It’s an online-native brand that still makes about 95% of its sales online. In FY25 it sold £647.3 million, up from £607.3 million, but kept just £6.9 million as pre-tax profit, down from £11.9 million. That’s about 1p in every £1. Yet halfway through that year, its board decided to stop competing on price and put money into stores and events.

So if you were sat on that board, would you see the spend on physical spaces as a cost or a bet? I’ll walk through the backstory and what’s happening now, so you can make your own judgement before I offer mine.

First, we need to remember that thin profit tends to come from two places.

Two causes of thin profit

The first is cost centres: one-way spends that do zilch, zip, nada to put money in the bank. The classic is a discount that goes out to everyone, including customers who’d have paid full price.

The second is value creators: money spent on something that’ll keep bringing in profitable sales. For a brand that sells mostly through a screen, I’d argue physical spaces belong here. At least, if you can prove it.

Gymshark’s FY25 had both, split by the board’s decision: discounting before, physical spaces after. That makes it a clean example of an online-first brand moving money away from what’s easy to track, and into what’s harder to measure.

The cost centres

Gross margin fell from 63% to 62%, which the accounts put down to “the increased level of discounting in the first half of FY25”. That half included an outlet in Bicester Village, billed as an ‘off-price shopping experience’, and Black Friday discounts of up to 70%.

On top of that, £10.5 million of FY25’s costs were the one-way kind:

• £5.2 million on the restructure that came with the change of strategy. And that number is people’s jobs - the restructure put 296 roles at risk. However it looks in the accounts, it’s never just a one-way cost on a human level.

• £3.7 million writing down technology, put down to “technological obsolescence”.

• £1.7 million writing down the Stratford store, with no more detail than “the current year impairment relates to the Stratford retail store”.

(These add up to £10.6 million because each is rounded; the filed total is £10,473k.)

The value creators

Back in 2013, Gymshark’s founders famously emptied the business bank account to book a stand at BodyPower, the fitness expo at the NEC. Sales went from £300 per day to £30,000 in 30 minutes. In September 2024, its Lift NYC event pulled in 7,500 people and $600,000 of online sales (about £450,000).

Despite the 11-year gap, it’s the same move at a different scale. Isn’t it funny that Gymshark became “the” eCommerce success story, yet it was a stand at a physical expo that poured petrol on it?

The thing is, gym culture is peer culture. You notice what the person on the next bench is wearing, or you ask in the changing room where they got their hoodie, and nobody’s embarrassed about it. It’s just what we do. And the kit is analogue: you judge it by how it fits, how it moves and how its quality holds up when you’re squatting at 2x bodyweight.

When the board pulled back from discounting, that’s the playbook it went back to. In its own words: “The new strategy saw a pull-back from competing on price and value, instead focussing on deeper storytelling and building real reasons to believe in Gymshark products”. In the second half of the year, it opened new stores in White City, Amsterdam and Manchester. All three had been announced before the change of strategy, and they still went ahead.

But the question is whether, at today’s scale, these physical spaces can still have that kind of commercial impact - or whether it’s money thrown into the wind. Here are the three questions I’d ask - of Gymshark, and of your own numbers.

1. Is the cash being spent on an asset?

I’d start with the cash flow statement, under investing activities. Gymshark put £32.4 million into stores, equipment and systems, up from £16.8 million. This was split as £15.7 million on stores and equipment, and £16.7 million on software and systems. So it’s funding both sides - the screen and the physical spaces.

The flip side of investing in physical spaces is that the cash commitment is also long term - the brand’s signed up to £124.4 million in future lease payments. We already know that this brings risk for the brand because Stratford was written down in FY25, and the accounts don’t say why.

Then, having established what the cash is being spent on, I’d look for what’s being done to limit the downside. In Gymshark’s case, only £16.7 million of those lease payments are due in the next year. At about 2.6% of revenue, that’s a manageable annual commitment. And Dubai is run via a franchise partner, and for other newer stores, Gymshark will review the trading performance and customer feedback before a wider roll out.

That’s how you measure a physical space: sales and customer feedback, reviewed before you place the next bet.

2. Which sales lines went up because of it?

Here, I’d be looking for the revenue split by channel. Gymshark’s store sales rose from £15.6 million to £27.5 million, up 76%. But online added more (£23.3 million) and is still 94.6% of sales, against stores’ 4.2%.

So if the percentage contribution is so tiny (relatively speaking), why fund stores at all? Well, Gymshark’s done the research: “a notable proportion of consumers value interacting with brands in real life in addition to online”.

Stores are where you build the real reasons to believe in a product - where you go to drink the brand Kool-Aid.

3. Can you afford it if it doesn’t work?

This one’s wildly underestimated. A physical bet is only a good bet if a miss won’t sink you, so look at cash from operations and borrowing. In FY25, Gymshark generated £26.0 million of cash from its operations, but very little of that was profit. Most of it came from adding back costs that don’t involve cash leaving the business, like depreciation and the write-downs, and from timing, such as how much stock it held and when it paid suppliers. It’s also less than the £32.4 million it invested, so its trading didn’t cover the bet on its own. Its £120 million credit facility was used during the year… but it was repaid in full by the year end.

All in all, Gymshark can still pay its bills, even with the investments. It’s betting on stores from a position of strength, not desperation, even if its trading alone didn’t pay for it this year.

One caveat: that £6.9 million of pre-tax profit includes a £7.1 million currency gain. Without it, FY25 would have been a small loss - luck the stores had nothing to do with.

My read

Two of the three questions come out clearly in Gymshark’s favour: the money went into something it keeps, and the downside is hedged, so it can afford a miss. The third is too early to call: store sales are up 76%, but they’re still only 4% of the total. Will that be enough to cover the cost?

So my read is that Gymshark’s thin profit - and investment in physical spaces - is mostly a bet, and a well-hedged one. Some of it was cost - £10.5 million of one-way costs, plus the discounting it knocked on the head - but the money it chose to spend went into physical spaces. The number to watch is gross margin back above 63% in the FY26 accounts - a sign customers are paying closer to full price for kit they’ve seen, touched and tried on.

That’s the bit I find exciting. As it gets harder to trust what’s on a screen, the brands that keep showing up in person have something that can’t be faked. You just need the numbers to show it’s working.

Your turn

Here’s the audit I’d invite you to run this week, using the same three questions. Grab last year’s accounts and list every place your customers meet you in person - a store, an event, a pop-up, a run club - with what each one costs. Then, for each one:

1. Is it an asset? Is the money going into something you’ll still have next year? If it comes with a long-term commitment, like a lease, how much of it is due in the next 12 months?

2. Which sales went up because of it? Name the number that tells you it’s working - store sales, full-price sales, repeat customers, online sales around an event - and strip out the luck first (a currency gain, a weird weather pattern creating a surge in demand… whatever). If you can’t pin it to a number, it’s most likely a cost centre… just wrapped up in a fancy story.

3. Can you afford it if it doesn’t work? If it flopped, would your own trading cover it, or would you be borrowing to keep it going?

Then decide: keep it, cap it, or redesign it until you can measure it - and put a date in the diary to check the number. If you do cut one, be clear where the money goes instead. Pushing it into another discount just swaps one cost centre for another.

So, over to you: are your physical spaces a cost, or a bet worth backing? I’ve spent over 16 years championing the concept that pure play doesn’t mean screen only - and I’ve no intention of changing course.

If you want to run these questions on your own brand, I run one-day workshops for founders and senior teams. Reply to this email or message me on LinkedIn.

Unless stated otherwise, figures are from Gymshark Topco Limited’s Annual Report and Financial Statements for the year ended 31 July 2025, filed at Companies House under Gymshark Group Ltd (company 12711328) as “Consolidated accounts of parent company for subsidiary company period ending 31/07/25” on 22 April 2026.

Page references use the PDF page counter (the filing is scanned, so it can’t be text-searched): strategy p.4; margin p.6; cash and borrowing p.7; income statement p.40; cash flow p.46; revenue by channel p.61; write-downs and currency gain p.63; leases p.68; restructure p.84; research and store review p.28. Sources outside the accounts are linked where they’re used.

This content is produced for informational purposes. It does not constitute specific business, commercial, or investment advice for any individual organisation. For specific business guidance, please get in touch: suzannah@strongbrandstrongbusiness.com.