Brief:

• Under Armour agreed to sell the MyFitnessPal platform to venture capital firm Francisco Partners for $345 million in a deal expected to close during the current quarter, per an announcement. The sportswear brand also plans to stop operating its Endomondo social fitness network operations at the end of this year.
• MyFitnessPal and Endomondo are currently part of Under Armour's connected fitness segment, which also operates the MapMyFitness platform to track running and workouts. Under Armour plans to continue operating MapMyFitness, whose GPS tracking apps include MapMyRun and MapMyRide, and its connected footwear business.
• Francisco Partners will operate MyFitnessPal, which has more than 200 million users worldwide, as a standalone company. The firm has raised more than $24 billion and invested in more than 300 technology companies during its more than 20-year history, per the announcement.

Insight:

Under Armour's sale of MyFitnessPal and the pending shutdown of Endomondo mark its retreat from the fitness app category, which is about to get more competitive as Apple later this year launches its Fitness+ service that will be integrated with the Apple Watch. Meanwhile, sportswear giant Nike continues to see success with record usage for its Nike Training Club and Nike Run Club apps, helping to support its digital commerce growth. In addition, exercise equipment company Peloton, which also offers virtual workouts, has emerged as a formidable competitor, reporting sales growth of 172% to $607.1 million in its last quarterly report.

Even as gyms are gradually reopening at reduced capacity following lockdowns that severely hampered revenue, fitness enthusiasts continue to seek ways to get exercise while limiting in-person contact. While virtual workouts and health tracking apps can help users maintain an exercise routine while also practicing social distancing, an increasingly crowded space means app operators must put more resources behind acquiring and retaining app users, something Under Armour, whose sales are lackluster, may not have been prepared to do. Under Armour spent heavily on acquiring activity app users in 2017 even as revenue from these apps has slowed down, per a Gartner L2 report.

Under Armour acquired MyFitnessPal for $475 million in 2015 to expand its digital platform into online fitness communities to help increase sales. That year, it also bought Endomondo for $85 million to add to its portfolio of digital offerings, The Wall Street Journal reported. Two years later, Under Armour laid off about two dozen employees at its connected fitness unit as part of a cost-cutting program. The company will still operate MapMyFitness, which it had bought for $150 million in 2013, to maintain a foothold in the business for connected wearables.

For Under Armour, the sale of MyFitnessPal and shutdown of Endomondo are part of its plan to focus on key strengths after seeing a 41% decline in sales in Q2 from a year earlier as the pandemic led to store closures, per a quarterly announcement. The company managed to return to profitability in Q3, though revenue was flat compared with the prior year at about $1.4 billion. Under Armour estimated that revenue will decline during the remainder of the year because of pandemic disruptions to its supply chain, leading to delays in deliveries of its spring products until early next year, per a quarterly statement.