Lululemon’s Start-Up Affair

On Monday, June the 29th 2020, the infamously trendy sports clothing retailer Lululemon, registered as Lululemon Athletica Inc. announced its decision to acquire Mirror, a start-up that created an interactive workout platform. The transaction, valued at $500 million, led to a doubling of Lululemon’s shares only hours following its announcement.

The company’s CEO, Calvin McDonald described the acquisition as a strategically advantageous transaction allowing their emergence as a leader in the personalised in-home fitness service providers. Given the continuing lockdown restrictions amidst the COVID-19 pandemic, and people’s potential reluctance to seek fitness services provided by gyms and other sports venues, it is highly probable that this business move will ensure Lululemon’s future growth and positive financial quarterly and end of year results.

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Mirrored Success

Mirror was set up by a former ballerina – Brynn Putnam – and launched officially in September 2018. Their unique product looks like a regular mirror, but once turned on, the users can see a fitness instructor delivering full-length workout classes, as well as their own reflection. The total cost of the service comes at about $1540, with $1,495 that users to pay for the Mirror, and an additional monthly subscription fee of $39 to get access to live-streamed classes. In 2019 the company was valued at some $300 million, and had a revenue of around $1 million in sales per month, being highly popular among celebrities.

The company has also been highly spoken about among venture capitalists. Prior to its launch, the company raised $13 and $25 million in financing in two funding rounds held within only six months apart. Following its launch Mirror successfully secured an additional $34 million bringing the company’s funding at $72 million. Among its investors, one can count in various venture capital firms, such as Lerer Hippeau, Spark Capital and Point72 Ventures.

The Deal

Lululemon had first shown interest in Mirror in mid-2019 when it invested $1 million in the business. This is Lululemon’s first acquisition to date and is aimed at broadening Lululemon’s business spectrum more into the arena of digital content within the health and wellness market.

Nasdaq reported that Lululemon is hoping to fund the acquisition from its own liquidity reserves and it is expected to be closed by Q2 2020. Following the close of the transaction, Mirror will be run as a stand-alone business and Putnam will keep her role as Mirror’s CEO, while directly reporting to Lululemon CEO Calvin McDonald.