(Bloomberg)—Yoga-pants retailer Lululemon Athletica Inc., No. 55 in the 2020 Digital Commerce 360 Top 1000, agreed to buy Mirror, a maker of in-home fitness equipment, for $500 million, broadening a partnership that began last year as exercise increasingly moves away from traditional gyms.
Mirror will operate as a standalone company within Lululemon and retain its chief executive following completion of the deal, the companies said Monday in a statement. The purchase will be paid from Lululemon’s primary sources of liquidity, including $800 million in cash and $700 million in credit facilities.
Lululemon with Mirror will focus on experiences, not just retail
The deal furthers Lululemon’s shift to become a more experience-based company and beyond its roots as a traditional retailer. While the Vancouver-based company has always leaned into health—with many of its existing stores offering free running clubs or yoga classes—last summer it moved to monetize its workout offerings by opening a Chicago store with a gym.
Home-fitness products such as Peloton bikes and Mirror’s wall-mounted device have gained in popularity as the coronavirus pandemic has shuttered gyms. New York-based Mirror, known for its ubiquitous subway ads, also offers customers live classes and on-demand workouts, mimicking what they might have once paid a personal trainer at the gym to oversee.
The deal is expected to close in the second quarter of the fiscal year. Lululemon took a small stake in Mirror last year.
Lululemon CEO Calvin McDonald said on CNBC that the acquisition was not motivated by boosting his company’s apparel sales but by the home gym product’s own potential. He said Mirror will be profitable as soon as next year and while it’s currently only available in the U.S., Lululemon plans to offer Mirror internationally.
Mirror’s trademark product, which looks like a standard full-length mirror when not in use, retails for $1,495. Shoppers can also pay in $42 a month installments.
The Mirror platform has a “massive TAM [total addressable market], significant revenue synergies and lower customer acquisition costs” that should produce high growth and returns, according to Cowen. The addition of Mirror offers Lulu a “place in the home with its hardware + content,” as well as “daily mindshare and a platform for its 2000+ ambassadors and events,” Cowen added.
Shares gained as much as 8%, the biggest intraday advance since April 17. The stock has outperformed in 2020, having risen 36% year to date, thanks to the popularity of athleticwear while people work at home during the COVID-19 pandemic. The S&P 500 Index has dropped 5.3% thus far this year.Favorite