Lululemon bets on at-home exercise

Buys fitness platform mirror for $500 million

Lululemon Athletica Inc. is making a big bet that people will still exercise at home when the pandemic subsides by acquiring an athome fitness platform for US$500 million.

The vancouver-based yoga apparel company last week announced its deal to buy Mirror, a two-year-old fitness startup in the United States that sells equipment as well as subscription services for home exercise and wellness classes.

The equipment, called the Mirror, is both a mirror and a digital screen that allows users to see their reflection while simultaneously watching a workout class — dubbed by the New York Times last year as “The Most Narcissistic Exercise Equipment Ever.” The Mirror retails for US$1,495, plus another US$39 per month for a membership to access the classes.

“At-home fitness has huge potential,” Cowen and Co. analyst John Kernan said in a note to investors last week after lululemon announced the Mirror deal.

online exercise courses have surged in popularity through the pandemic, with gyms and fitness studios closed and most people confined to their homes.

For example, Peloton Interactive Inc., a home fitness company that sells stationary bikes and subscription-based spinning classes, signed up more than one million people to free trials this spring.

“The reality is you have more people streaming yoga in youtube videos. you have more people working out from home. And I think some of that behaviour, obviously, is going to stick on the other side of the pandemic,” RBC Capital Markets analyst Kate Fitzsimons said. “With people realizing that they can workout from home, why would you pay the $200-plus for an equinox membership?”

Lululemon’s decision to make the $500-million deal in such a “tenuous” mergers-and-acquisitions atmosphere shows how strongly the company believes in the future of home fitness, Fitzsimons said.

“We’ve seen a lot of deals fall through,” she said. “The fact that Lulu is executing this in the midst of the pandemic, I think, No. 1, shows extreme confidence in the asset that they’re acquiring.”

Lululemon has in recent years aspired to transform itself from a simple yoga outfitter into an “experiential brand,” offering in-store courses and boot-camp festivals in pursuit of market share in the us$3-trillion global wellness market, according to Lululemon chief executive Calvin Mcdonald.

The brand is currently in the midst of a three-year expansion plan, pushing into work attire and self-care lines, with a goal of doubling both menswear and digital sales and quadrupling international sales by 2023.

The Mirror deal fits in with Lululemon’s expansion into experiences, and continues the company’s longtime marketing playbook that promotes the brand by giving product to “global ambassadors” — usually local athletes and yoga instructors. Mirror founder Brynn Putnam was a Lululemon ambassador.

even before the Mirror deal, Lululemon had been using its ambassadors to create online classes. For example, Lululemon during the pandemic has promoted online yoga classes led by its ambassadors on Instagram.

“We are seeing them create content and engage the customers in differentiated ways through the pandemic,” Fitzsimons said. “With Mirror ... their focus is: Let’s really try to monetize that digital sweat component.”

Lululemon has been invested in Mirror since last year and its ambassadors were running courses on the platform. That content-sharing will only intensify with the new deal. Going forward, Mcdonald said all instructors on the platform will be wearing Lululemon products.

But pushing apparel sales with Mirror is only a bonus of the deal, Mcdonald told investors on a conference call last week. The main objective, he said, is to compete for “daily mindshare,” part of his vision to capture consumer attention more frequently by using experiences, rather than a yoga pants purchase.

“We will have a place in the home,” he said. “There’s a huge advantage for our brand.”

At-home fitness had been a growing segment of the wellness market before the pandemic, and Mcdonald said the lockdowns have only accelerated that growth.

“It’s brought the future closer to the present,” he said.

An internal poll of Lululemon customers found that 64 per cent were exercising at home before the pandemic and that has since grown to 75 per cent. Of those customers with home equipment, 86 per cent said they’d keep using it at least as much as they did before the pandemic.

Lululemon is planning to start selling the Mirror in its stores in its fourth quarter.