Connected fitness is losing Under Armour money, but CEO says data will pay off

By Jonah Comstock
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Although Under Armour raised revenues overall by about 30 percent this quarter, the company’s Connected Fitness business — made up in large part by its 2015 fitness app acquisitions — is still not turning a profit. UA says it lost $16.5 million in Q1 on Connected Fitness, more than the $15 million it lost in Q1 2015.

“While we are still in investment mode, we believe that the future of Connected Fitness is very bright for our brand,” CEO Kevin Plank said in prepared remarks on a recent investor call. “In 2016, we will continue to move our digital strategy forward as we focus on driving even better consumer engagement while also building our math house to drive insights to make better decisions and ultimately build better products for our consumer.”

In longer remarks during the Q&A, Plank argued, as he has before, that the real value of the Connected Fitness business is in the data — which the company continues to collect — and the opportunities to leverage that data into increased apparel sales. 

“Data is the new oil,” he said. “Those who have the data, those who have the understanding of the consumer, we believe are the ones that are going to win. And for us, now having a Connected Fitness community of over 160 million [users and] adding well over 100,000 new registrants every single day that are volunteering information to us, like how much they slept, how active they are, what they did when they exercised, how hard they exercise. And they're doing things like using our gear tracker, up to the tune of a million people that are asking us to tell them when they should buy a new shoe by evaluating the type of terrain they are running on and the distance they're running. The information we're getting is extraordinary. But frankly, we're still – we're in the first inning of what's happening in this world.”

There’s positive news for the Connected Fitness business as well, Plank pointed out on the call. Subscription revenues for the quarter nearly matched subscription revenues for all of 2015, for instance.

Under Armour launched HealthBox this quarter, a bundled offering of three digital health devices, and the company just began airing commercials for it, featuring pro-wrestler-turned-actor Dwayne “The Rock” Johnson. According to Plank, HealthBox was the second best-selling product on Under Armour’s website this quarter. 

In general online shopping is growing for the company, which is important in the face of hard times for sports retailers like CitySports, which declared bankruptcy last fall. Under Armour reported that — for the first time — more than half of its US-based online shopping traffic this quarter came from mobile devices.

Toward the end of the call, Plank compared MyFitnessPal, MapMyFitness, and Endomondo to an amusement park and Under Armour to the gift shop. 

“I use this analogy: the purpose of a brand is that we bring people to the amusement park and we put them on the roller coaster and they go up in the air and they get excited, and when they come off … they want to engage somehow, and [before] they didn't have a way to do that other than to see the data they track. With us, we have the ability to drive them through the gift shop, and with that hopefully we’ll help them buy lots and lots of Under Armour shirts and shoes.”