Bodybuilding.com has been acquired…wait doesn’t sound like an article that I wrote last year?
No…you’re not going crazy! Liberty Expedia sold Bodybuilding.com to Expedia Group on April 16th, 2019. Truth is, Bodybuilding.com was never really sold, but received as a free gift with purchase within the larger Expedia consolidation deal between two billionaires; John Malone and Barry Diller.
Additionally, you might be questioning yourself if I just wrote an article about Bodybuilding.com 10 days ago…again you‘re not going crazy! In that May 17th article, I stated my case that the fate of Bodybuilding.com was signed, sealed, and delivered in silence by Expedia Group a few weeks earlier.
What I didn’t know when writing that article was that Bodybuilding.com was indeed already sold…it just wasn’t publicly announced yet.
Who Bought Bodybuilding.com?
The specialty supplement internet retailer and media company was sold to The Najafi Companies, a Phoenix-based private equity firm. The founder Jahm Najafi is a minority owner in the NBA franchise the Phoenix Suns.
The Najafi Companies’ website highlights that they have “deep experience in media, technology, retail and consumer.” If true, that’s exactly where Bodybuilding.com currently is positioned in the market. Related Prior/Current investments include, CPG brands Pert Plus and Sure, retailer SkyMall, baby health brand Wellements and streaming media property Kanopy.
Since the private equity fund is personally funded by Mr. Najafi, you have to assume he has a strong investment strategy and eye for good deals. Also noted on the website, The Najafi Companies are “concentrators not diversifiers,” but more on that point at the end of this article.
What Happened to Bodybuilding.com?
If you haven’t followed Bodybuilding.com closely over the last half-decade, here is a quick update:
- Bodybuilding.com has been in a woulda coulda shouda phase for the back-half of the 2010s
- Bodybuilding.com became strategically lost and began financial performance free-fall when they tried to fight a battle that wasn’t winnable with Amazon (see below).
- Bodybuilding.com’s promotional strategy, which was used to attack Amazon, actually made the battle harder, as third-party sellers picked up BOGOs and eroded pricing further…only creating more circular challenges for the supplement internet retailer.
- Bodybuilding.com didn’t need to fight that battle primarily on pricing against Amazon
This resulted in BBCOM becoming lost…
According to the latest Expedia Group earnings report, Bodybuilding.com had;
- 2020Q1 sales of $39M
- 2019Q1 sales of $52M
- 2018Q1 sales of $66M
- 2017Q1 sales of $91M
I have mentioned this in some of my previous YouTube videos on Bodybuilding.com, but that quarterly performance now puts Bodybuilding.com behind both GNC and Vitamin Shoppe in digitally-initiated nutritional supplement sales.
Who is Bodybuilding.com in 2020?
Simply showing the falling revenue numbers hardly paints the whole picture of Bodybuilding.com. Yes, that will need to addressed by the new owners, but there is a bigger long-term transformation that needs to be put ahead of short-term sales data.
Bodybuilding.com’s transformation surrounds their ability to better connect content with commerce…
The Bodybuilding.com website still has traffic that is estimated around 10 million visitors a month. The “store” portion of that monthly traffic is much lower, but that side of the business has done a good job at converting and keeping strong metrics overtime (though smaller and smaller traffic over the years). Will it ever reach ~$500M in product sales again? No. Is that OK? Yes.
I actually think ~$250-300M in product sales is topping out for Bodybuilding.com in this new categorical retailing environment that is both disintermediated with brands selling D2C and disseminated with substitute merchandising across all large retail channels.
What Does Bodybuilding.com Look Like in 2025?
Just to get the worst-case scenario on the table…if The Najafi Companies can’t solve this puzzle, it will be sold again for pennies and likely gone forever!
The more likely scenario is one that is closer to a “private equity transformational win,” which essentially is the following;
- Get to the most simplistic core value generating assets, processes, procedures, team members, etc.
- Cut the rest of the fat (aka sell off or shutter)
- Show a few years of turnaround profitable value and sell it for a multiple of its purchase value
What is the most simplistic core value generating assets?
- BodyFit (and associated media arm) = currently profitable, aligned with emerging consumer trends that were accelerated by COVID-19, and 10X scaleable in 5 years. This is the gem of the purchase and will be the main focus of new ownership.
- Third-Party Marketplace = less cash intensive, unique curated merchandising within long-tail brand availability, and better aligns connecting content with commerce with self-service advertising model
- Private Label(s) = current ones aren’t much to write home about, but that doesn’t mean the core strategy is wrong and this should grow immensely under new ownership
What fat should they cut? They should sell any remaining distribution assets. The marketplace strategy can run within a dropshipping model. The Najafi Companies doesn’t want to be reselling supplements and running a logistics company.
Peanut Gallery Needs Patience
When speaking with Jas Krdzalic, Bodybuilding.com’s CEO, in late 2019, I was suggesting a restructuring plan would need ownership to have a strong enough stomach for 2–3 years more of bad performance before it showed promise. In his defense, he has already laid the groundwork of 2–3 years of pain that has culminated into some early momentum in BodyFit.
Additionally, the marketplace strategy is still new and creating a content and commerce connected flywheel takes time to begin to turn. When it does, it attracts vendors and interested advertisers that wants Bodybuilding.com to be a keystone partner in their business model.
It’s important to remember that this isn’t 2015 and whatever equity that was built with any stakeholder is now diminished to the point where they need to prove their worth again…
The bones have always been there for Bodybuilding.com to revert back into being a highly profitable private company, but it needed a visionary leadership team and ownership structure that was outside of the billion dollar or bust bureaucratic decision trees.
Bodybuilding.com must focus on being a value-accretive retailer that uses a growing flywheel to drive bundled revenue providing a differentiated shopping experience that would secure loyal customers. It 100% needs to stay away from the price game and getting distracted by Amazon.
If they do that, they have no 1–1 specialty competitor and have a chance of building it’s business back to 2X current revenue levels.
Finally, The Najafi Companies concentrates on investments (doesn’t diversify) and will likely have plans to acquire ancillary businesses that can be rolled up with Bodybuilding.com for a larger enterprise exit.