In its first acquisition ever, athletic wear company Lululemon Athletica Inc. (NASDAQ: LULU) will buy MIRROR, an in-home fitness company, for $500 million. Launched in 2018 by Brynn Putnam, MIRROR offers a $1,495 mirror-style product that mimics an in-studio experience. The company also offers weekly live and on-demand classes and one-on-one personal training sessions. MIRROR offers more than 70 new classes and over 40 class types per week, including strength training, weight training, pre- and post-natal workouts, yoga, etc.
The MIRROR Membership, which is needed to access the classes, is $39 a month with unlimited classes for up to six people. It requires a one-year commitment. Personal training sessions are available for $40 per session.
In 2020, MIRROR’s revenue run rate is expected to be $100 million. When the acquisition is complete, MIRROR will operate as a standalone company with Putnam staying on as chief executive officer, reporting to Lululemon CEO Calvin McDonald. Subject to customary closing conditions, the deal is expected to close in the next several weeks. Lululemon will fund the acquisition from existing liquidity.
“In 2019, we detailed our vision to be the experiential brand that ignites a community of people living the sweatlife through sweat, grow and connect. The acquisition of MIRROR is an exciting opportunity to build upon that vision, enhance our digital and interactive capabilities, and deepen our roots in the sweatlife. We look forward to learning from and working with Brynn Putnam and the team at MIRROR to accelerate the growth of personalized in-home fitness,” said McDonald in the announcement.
Putnam, who is also a former Lululemon Ambassador, also commented on the acquisition.
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“We are thrilled to officially become a part of the lululemon family. As part of lululemon, MIRROR can further strengthen its position and accelerate its growth by leveraging lululemon’s deep relationships with its guests, ambassadors and communities, as well as the company’s infrastructure, including its store network and ecommerce channels, to acquire new users,” said Putnam.
Why Lululemon wants to acquire MIRROR
In the company’s June 29 investor presentation, Lululemon said it finds MIRROR an attractive partner because the company provides an innovative in-home interactive fitness studio experience that complements Lululemon’s target audience and it fits in with the company’s strategic vision.
“Be the experiential brand that ignites a community of people living the sweatlife through sweat, grow and connect.”
Lululemon believes MIRROR has a lean and efficient revenue-generating model, a compelling value proposition, and a strong online presence in terms of sales and marketing. Lululemon had previously invested in MIRROR in 2019.
Advantages to MIRROR
- Access to Lululemon’s customers
- Leverage Lululemon’s distribution system to scale growth
- Use Lululemon’s marketing channels to lower customer acquisition costs
- Expand talent through Lululemon Ambassadors
- Strong brand reputation
- Additional lead generation opportunities
- Financial strength and liquidity to support MIRROR’s day-to-day operations and future growth
Advantages to Lululemon
- Expand and innovate omni guest experiences
- Offer a dynamic content platform to enhance and scale guest products and services
- Accelerate monetization of “digital sweat”
- Create additional revenue with a path to profitability
- Create a larger community with MIRROR customers and Lululemon Ambassadors
- Develop opportunities for product integration
About Lululemon
Launched by Chip Wilson in Vancouver, Canada in 1998, Lululemon is a yoga-inspired, technical athletic wear company for women, men and girls with retail stores worldwide as well as an online store. Their products are pricey (e.g., $68 for a yoga mat bag, $29 for a vinyasa cotton scarf), but are good quality. For the company’s first fiscal quarter of 2020, for the period ended May 3, 2020, Lululemon’s net revenue was $652.0 million, a 17% decrease, while direct-to-consumer net revenue increased 68%. The decline in revenue was primarily due to the closing of retail locations due to the COVID-19 pandemic. Despite the decline, the company reported net income of $28.6 million, or $0.22 diluted earnings per share.
Insider Take
Lululemon’s acquisition of MIRROR seems like a perfect fit, pardon the pun. The companies have complementary goals, products and services that make this ideal for both parties. From Lululemon’s perspective, the acquisition provides an additional revenue stream, so the company isn’t entirely dependent on retail sales. That is particularly important during the pandemic and to ensure financial sustainability for the long haul long after COVID-19 is gone. Meanwhile, MIRROR gets access to a new customer base and has the financial backing, support and resources for scaling its operations and for long-term growth.
