The athleisure company’s first acquisition is a bet on the future of fitness and a way to further tie into the lives of its customers.
Lululemon, the purveyor of expensive athleisure and activewear, is betting on the future of personalized remote exercise as a way to reach customers by acquiring Mirror, a home fitness start-up that sells a $1,495 wall-mounted machine for streaming workout classes.
The $500 million purchase, which Lululemon announced on Monday, is the company’s first acquisition and follows its $1 million investment in Mirror last year. It’s a coup for Mirror and its chief executive, Brynn Putnam, a former New York City Ballet dancer who introduced the product in 2018 and has raised $72 million from investors. Mirror charges customers $39 a month to stream its live or on-demand classes.
The purchase fits with Lululemon’s ambitions to become an experiential brand that helps customers live a “healthy and mindful lifestyle across multiple experiences,” as it said last year.
“This isn’t just about getting guests to buy apparel,” Calvin McDonald, chief executive of Lululemon, said in an interview. “This is about strengthening our community and our loyalty and our relationship with our guests and memberships, and it’s going to be its own revenue stream model, which we’re excited about.”
Mirror, which is based in New York, expects to bring in over $100 million in revenue this year and either break even or be slightly profitable in 2021, Mr. McDonald said. Ms. Putnam, who will remain chief executive of Mirror and report directly to Mr. McDonald, said that the interactive fitness company had “tens of thousands of subscribers” and had seen its business accelerate during the coronavirus pandemic.
Home fitness products like Peloton and streaming classes have boomed during the pandemic. Gyms and fitness studios are largely closed, and many customers are nervous to return to those that have reopened. Lululemon said that while the pandemic was not the “trigger” for the purchase, it bolstered the case.
“It definitely has helped us learn and see quicker into the future now,” Mr. McDonald said. “Guests have accelerated their behavior and accelerated the adoption of in-home sweat.”
Lululemon, which is based in Vancouver, British Columbia, said it would promote Mirror online and sell its exercise machine in “a number of locations.” Mirror has only two physical locations. It has built a popular following online, including among celebrities like Reese Witherspoon, Alicia Keys and Ellen DeGeneres. Its classes include Pilates, barre, kickboxing and strength training.
The acquisition will also expand a “content creation partnership” between Mirror and Lululemon. Classes like meditation that are taught by Lululemon’s “global ambassadors” are already available on the Mirror platform. (A key part of Lululemon’s marketing strategy has long been to team up with people like athletes and yogis to promote its brand.)
Ms. Putnam, a 37-year-old Harvard graduate, was once a Lululemon ambassador herself.
Mr. McDonald suggested that it would not be surprising to see instructors on Mirror clad in Lululemon gear in the future. “The versatility of the platform completely aligns with how we view the versatility of our product,” he said.
The acquisition, expected to close during this quarter, will be paid in cash, with $50 million held back and paid out over two years, the company said.
Lululemon has been hurt by the coronavirus pandemic, but nowhere near as badly as most other apparel chains. The company recently reported that its net sales for the quarter that ended May 3 tumbled 17 percent to $652 million, but in that period, its direct-to-consumer sales jumped nearly 70 percent.
It said on Monday that its liquidity included more than $800 million in cash, a $400 million revolving credit line and a new one-year $300 million revolving credit line.
Credit: Fast Company – Click here to view the article
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