On April 23, 2020, the future fate of Bodybuilding.com was signed, sealed, and delivered to anyone that has been paying extremely close attention to its owner Expedia Group.
In this Expedia Group press release, Bodybuilding.com was not mentioned a single time, but as the 1989 Debbie Gibson song that goes by the same name states “silence speaks a thousand words.”
Instead of stating those thousand words, I will give you the cliff notes…
Bodybuilding.com will be sold before the end of 2020!
For those that have followed my content over the years, you likely recognize that I’ve stated previously that I didn’t believe Expedia Group will be the long-term owner of Bodybuilding.com.
It was actually close to a year from the above noted press release that Expedia Group announced the consolidation of the “Expedia Asset” and it received Bodybuilding.com as a “free gift with purchase.”
In my below YouTube video, that begins with a recap of the April 16, 2019 Expedia Group press release, I state around three and a half minutes that I didn’t believe Expedia Group would see any long-term value in the specialty supplement internet retailer. I went on to offer a slew of random M&A musings, in which some were other companies owned by Barry Diller (owner of Expedia Group) and some were completely unrelated.
One thing I did not do in that video, and several other pieces of content after it, was define a date of sale. I was waiting for a proverbial sign and I got it loud and clear in the April 23rd, 2020 Expedia Group press release.
#1 Reason = Expedia Group is Travel…Not Supplements!
Stated at the tippy top of the press release, from the tippy top of Expedia Group, was the following statement from Chairman Barry Diller, “we have one mandate…to reconstruct a stronger enterprise to serve the future of travel. We are unable to make any predictions as to when travel will rebound but we emphatically believe that it will, for….’if there’s life, there’s travel.”
“If there’s life, there’s supplements” just doesn’t sound the same, does it?
Expedia Group has always been about travel. Bodybuilding.com has always been about fitness-related product sales and content. I’ve tried and tried my very hardest to bridge that core vs. non-core focus gap, but it always ends up like this cat…
#2 Reason = COVID-19 Created Huge Travel Company Woes
If you didn’t pick up from the previous reason, Expedia Group is struggling because of the global health pandemic. There are a lot of industries that are feeling the heavy economic weight from COVID-19, but arguably the biggest is the travel industry.
Those are just the U.S. numbers, so you can extrapolate that out for a global travel company like Expedia Group.
In preliminary financial results released Thursday, Expedia said revenue for the March quarter has fallen by a range of 13% to 18%, to between $2.27 billion and $2.14 billion. Gross bookings, the total retail value of transactions conducted through its platform, fell by a range of 38% to 43%, to between $18.5 billion and $17 billion.
#3 Reason = Expedia Was Forced to Raise $3.2 Billion in Outside Capital
Due of the above travel industry woes, Expedia Group was forced to raise $3.2 billion in outside capital, as part of a comprehensive strategy to bolster financial strength. This consists of an equity investment of $1.2B by Apollo and Silver Lake, two highly respected private equity firms. The equity will be non-voting and non-convertible preferred stock. It will also entail approximately $2B in new debt financing.
When a company’s Chairman says “to conserve cash and survive” in a press release, it usually means they are looking at every division, function, and line item to extract as much costs and risk out of the company.
Bodybuilding.com is costly and risky for a company that knows travel only!
#4 Reason = Expedia Group Has New CEO
When there is a new sheriff in town, it means there will be new rules. When that new sheriff is already an insider, it means tightening all the old rules and creating additional ones. Peter Kern has been a key member of Expedia Group Board since 2005 and became their Vice Chairman in 2018.
Sometimes a “free gift with purchase” is valuable, but a lot of times that value is minimal and it get thrown away fast. Are you picking up what I am putting down?
#5 Reason = Financial Performance of Bodybuilding.com Has Been Poor
While nothing was included in the above mentioned preliminary 20Q1 filing (official 10-Q filing is 5/20/20), Bodybuilding.com was noted as having $7 million in operating losses attributed to Expedia Group for the year ended December 31, 2019. Moreover, Expedia Group was not the owner of Bodybuilding.com for the full 2019 calendar year and thus expected operating losses from the supplement internet retailer were actually higher.
- 2015 Bodybuilding.com would be staying
- 2020 Bodybuilding.com is getting a one-way ticket to new ownership