Under Armour had been attempting a comeback, which wasn't a great place to be entering a pandemic. And it's attempting to cancel its $280 million sponsorship of UCLA sports teams, which could be a sign of things to come. It's currently trying to reduce 2020 operating expenses by $325 million. Right now, Under Armour is showing the signs of a distressed company. As the chart below shows, since it acquired MyFitnessPal, revenue and net income have stalled and profitability has been more volatile and then the pandemic hit and everything took a significant drop. The most likely scenario is that MyFitnessPal is doing fine and Under Armour likes it, but the company needs the cash. It would be disappointing to see the app performing poorly while so many other fitness apps are surging. In that case, Under Armour won't likely get a good price for it, and surely nothing approaching what it spent. But this might indicate a shift back to being just an apparel company, which isn't the direction the rest of the fitness world is headed in. If sold, it's because it doesn't figure into the Under Armour's plans anymore the company believes it can profit from it more now than over the long haul. Perhaps MyFitnessPal is performing well, benefiting from current consumer trends. But if true, it's hard to put a positive spin on it. The sale of MyFitnessPal is still an unconfirmed rumor, which doesn't shed light on Under Armour's motivation.
And its connected footwear business is benefiting, with year-over-year workouts up over 200% since mid-March. In the Q1 earnings call, management noted a 275% increase in new users just since March. MapMyRun was a rare bright spot in the company's first quarter. To be clear, Under Armour's digital business is excelling during the COVID-19 pandemic. And it's what Under Armour shareholders expected. It's the kind of synergy Lululemon is hoping to create with Mirror.
Digital products promote the use of Under Armour's clothing, and clothing inspires consumers to work out via the apps.
This "walled garden" created a complementary system for Under Armour. At its 2018 investor day, management said: "Another key channel for us is our connected fitness community, MyFitnessPal, MapMyFitness, gives us access to millions of focused performers daily. Under Armour's digital business also played an important role in its turnaround plans.
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