Lululemon Looks Into the Mirror for Its Next Chapter

(Bloomberg Opinion) -- Lululemon Athletica Inc. is stretching itself into a new area of business. The seller of yoga pants and other workout apparel announced late Monday that it had agreed to acquire Mirror, a home-fitness product offering live and on-demand classes as well as personal training, for $500 million. Lululemon CEO Calvin McDonald has said that the startup expects to notch more than $100 million in sales this year and is on track to break even or earn a narrow profit next year.  

This deal, of course, does little to boost the top line sales for a company that had $4 billion in revenue last year.  But it is a worthwhile way for Lululemon to test its ability to move beyond its core retailing expertise. 

After securing at least $72 million in venture funding and winning some celebrity devotees, Mirror had long been thought of as a potentially powerful disruptor in the fitness business. But now that the pandemic has pushed legions of consumers to explore at-home exercise, its prospects look even brighter. It seems likely that gyms and boutique fitness studios – places where people do lots of heavy breathing in close quarters – will be among the last establishments consumers feel comfortable returning to as the economy reopens. This will be especially true if we see more reports like one earlier this week that a patron to a Planet Fitness gym in West Virginia may have exposed more than 200 people to the novel coronavirus.  In other words, the total addressable market for the Mirror has suddenly exploded.   

In addition to paying nearly $1,500 for the Mirror, a product that mounts on your wall like a mirror or stands in your living room, customers pay a $39 monthly subscription for access to classes. That recurring revenue makes for an attractive business model with strong profitability potential. One of the most impressive aspects of a larger but similar at-home fitness pioneer, Peloton Interactive Inc., has been how sticky its subscriptions have proved to be. If Mirror can achieve anything close to that, it will provide a predictable stream of cash for its new corporate parent. 

Lululemon has long used in-store yoga classes and running clubs to connect with its customers, and the Mirror acquisition is essentially an extension of that tactic for nurturing shopper loyalty and awareness. It's easy to imagine ways the brands can cross-promote each other, such as with Mirrors set up for trial in Lululemon shops or with Mirror instructors wearing Lululemon gear in their classes.  Simply having entree to Lululemon's far larger customer base could turbocharge Mirror's growth. 

There are certainly ways this acquisition could end up doing little to drive either business forward. Lululemon's prowess selling clothing may not translate well to scaling what is essentially a hardware and software business. And Lululemon still gets a relatively small share of its sales from outside the U.S. and Canada, so it doesn't have particularly deep experience in overseas markets, something that might be helpful to Mirror as it aims to grow. Overall, though, they seem like good partners to collaboratively court the kind of consumer that can shell out $98 for leggings and $1,500 for exercise equipment.

I always groan at the term “lifestyle brand,” because everyone in retail seems to think they are one and so few truly are. By expanding into home fitness, Lululemon looks more and more like a rare company that actually deserves that designation. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.

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