Lululemon has found itself a new workout routine. The $40bn maker of pricey yoga pants and athletic clothing is buying at-home fitness start-up Mirror for $500m. Moving into the sector makes sense. Stay-at-home orders are driving more people to exercise in their living rooms. But investors are right to wonder whether dropping a half a billion dollars on what is essentially a giant vertical TV is the best way to go about it.
Founded in 2016 and launched in 2018, Mirror sells $1,495 smart mirrors through which users can take live and on-demand exercise classes. It was last valued at $300m in October. Lululemon said the acquisition would bolster its “sweatlife offerings” and bring “personalised in-home sweat”.
The problem is that there is no shortage of options for those who want to sweat it out at home. Peloton, SoulCycle and NordicTrack are among those selling interactive workout bikes. For those into rowing there is Hydrow, which makes a connected rower with a 22-inch monitor. Gyms that have closed their doors have moved classes online. One of these, Planet Fitness, even offers them for free. UK fitness guru Joe Wicks amassed 2.5m followers for his YouTube channel. Why pay for an interactive mirror when you can get a similar experience streaming a workout class on your flat screen TV?
The pandemic has at least given Mirror a boost. Sales are expected to hit $100m this year — more than double reported sales last year. Lululemon thinks it can add to this by cross-selling the Mirror on its website and in stores. In return, it hopes to gain incremental apparel sales through product placement in Mirror classes. Think fitness instructors decked out in $128 Lululemon workout tights.
At about five times 2020 sales, Lululemon is paying a price that fits the inflated tech fitness trend. Peloton, for example, trades at a nine times sales multiple. Lululemon itself at 10 times.
But a time when retailers are still hoarding cash, Lululemon is making a bet that the Mirror will not crack.
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