Under Armour spending $560 million on social fitness
Under Armour is spending $560 million to scoop up two fitness apps in what is the athletic apparel company’s latest bid to compete in both the physical and digital worlds.
Under Armour, which on Wednesday also announced that 2014 sales leapt 32% from the prior year, will pay $475 million to buy MyFitnessPal and $85 million for Europe-based Endomondo. Endomondo has a strong presence in Europe, with 20 million registered users, while MyFitnessPal has 80 million users of its calorie counting and nutrition app.
Both of the deals add to Under Armour’s (UA) effort to gain a greater foothold in the world of fitness technology, which the company first seriously entered when it spent $150 million to buy MapMyFitness in late 2013. Under Armour claims it now controls the world’s largest digital health and fitness community with over 120 million unique registered users. It is a space that Nike and Adidas both compete in, with Nike+ and miCoach, respectively. Nike+ and miCoach are both linked to hardware sold by those companies in a bid to compete with Fitbit, Jawbone and other fitness trackers.
Notably, Under Armour never mentioned any sales or profitability gains that will be achieved with the acquisitions of Endomondo and MyFitnessPal. The benefit of owning these apps appears to center on data.
“We are developing a digital ecosystem that provides us with unparalleled data and insight into making every athlete better,” said Chief Executive Kevin Plank. He added that understanding the needs of athletes will ultimately help how Under Armour can connect as a brand.
Not that the apparel company is having any issues in that department. Fourth-quarter revenue rose 31% to $895.2 million, while profit for the period climbed to 40 cents a share from 30 cents a year ago. Analysts had projected $848.7 million in revenue on 39 cents in profit, according to a survey conducted by Bloomberg. Gains were broad, with footwear sales adding 55% in sales, apparel up 30% and accessories climbing 22%.
The company has reported sharp growth for years, though it is still tiny on the global scale compared to Nike (NKE) and Adidas (ADDYY). It has taken market share from Adidas in recent years, and third-party data suggests Under Armour is now larger than the German sportswear maker in North America (Adidas hasn’t yet reported 2014 results). Though Under Armour is rapidly growing, it still has an opportunity to sell more women’s items, footwear and target markets outside North America. All three of those businesses are fairly small today.