What Lululemon’s $500 million deal to buy Mirror says about the future of – Health News Today

Lululemon Athletica Inc. is betting big that people will still exercise at home when the pandemic subsides by acquiring an at-home 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. The Mirror retails for roughly US$1,500, plus US$39 for a monthly membership to access the classes.

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 between mid-March and the end of April.

“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 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, number one, shows extreme confidence in the asset that they’re acquiring.”

The purchase price is five times Mirror’s projected US$100-million revenue for 2020, which is “nothing to sneeze at,” Fitzsimons said in a note to clients last week. Peloton, by comparison, is projecting sales of US$1.7 billion.

Lululemon chief executive Calvin McDonald last week told investors that the pandemic has only accelerated a shift to fitness at home that was already underway. The brand is already well into a transformation from being an apparel company to a lifestyle company, pushing into what McDonald said is a US$3-trillion global wellness market.

“It’s brought the future closer to the present,” he said of COVID-19.

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

Mirror gives Lululemon a way to compete for “daily mind share” and push customers into “interacting with the brand on a daily basis,” McDonald said.

Lululemon is planning on selling the Mirror in its stores, and shifting its…