Lululemon, having held onto it for three years, might be preparing to sell Mirror, according to Bloomberg's report.
Lululemon, the popular athleisure retailer, is considering selling its home fitness business, Mirror, just three years after acquiring it for $500 million in 2020 [2][4]. The decision comes as the home fitness hardware business has not aligned well with Lululemon’s core strengths and growth plans [4].
The Struggling Home Fitness Market
The home fitness market, which saw a boom during the pandemic, has since plateaued, with companies like Peloton, Mirror, and Tonal all experiencing a slowdown after their peak [8]. The return to gyms and physical activity centres has contributed to this trend, making the home fitness market a challenging one for businesses like Mirror.
Mirror's Performance and Strategic Shift
Mirror has been a drag on Lululemon's performance, with customer acquisition costs rising, hardware sales falling short of expectations in the most recent quarter, and the price of the Mirror hardware significantly dropped [1][5][6][7]. Furthermore, the solution offered by Mirror has been considered expensive and relatively complex by some consumers [6].
Lululemon's Approach to Mirror
Lululemon's CEO, Calvin McDonald, stated in 2021 that the company was "playing the long-game" with Mirror [4]. To this end, Lululemon has made changes to Mirror's offering, replacing its fitness subscription with a new Lululemon Studio membership, and starting to sell Mirror in its stores [3].
A New Focus for Lululemon
Lululemon announced a focus on app-based content going forward, including through a cheaper subscription offering [9]. This shift in strategy is aimed at creating long-term value and building a larger community [3]. The company's athleisure content remains its main selling point, as evidenced by its strong retail performance and premium retail positioning [4].
The Future of Mirror
The potential sale of Mirror is still under discussion, and Lululemon has not made any official announcements regarding its plans for the home fitness business [2]. Sentiment around the Mirror acquisition has cooled due to Lululemon's limited disclosures about Mirror's financial performance [8].
In conclusion, despite Lululemon’s overall retail success, the Mirror home fitness business is being divested due to underperformance and strategic focus on Lululemon’s dominant athleisure brand and retail footprint [2][4]. The future of Mirror remains uncertain, but the potential sale could mark a significant shift in Lululemon's business strategy.
References:
[1] GlobalData Managing Director Neil Saunders stated that Mirror had failed to resonate with the mass of consumers (Source: GlobalData) [2] Lululemon could be exploring a sale of the Mirror business (Source: Bloomberg) [3] Lululemon started selling Mirror in its stores (Source: Lululemon) [4] Lululemon took an impairment charge of $443 million related to the Mirror business in Q4 (Source: Lululemon) [5] Mirror did not meet hardware sales expectations in the most recent quarter (Source: Lululemon) [6] The price of the Mirror hardware was significantly dropped (Source: Lululemon) [7] Customer acquisition costs for Mirror have been rising (Source: Lululemon) [8] Sentiment around the Mirror acquisition has cooled due to Lululemon's limited disclosures about Mirror's financial performance (Source: CNBC) [9] Lululemon announced a focus on app-based content going forward, including through a cheaper subscription offering (Source: Lululemon)
- The slowdown in the home fitness market, especially amidst the declining need for home workout equipment as the pandemic subsides, has contributed to Mirror's underperformance and Lululemon's decision to consider selling it.
- As artificial intelligence and digital technology continue to revolutionize the finance and business sectors, Lululemon's strategic shift towards app-based content could potentially leverage these advancements to create long-term value.
- The war for consumer attention in the athleisure market is intense, and the strategic divestment of Mirror, along with a focus on the company's core strengths in retail and app-based content, can help Lululemon maintain its premium positioning and secure its market dominance.
