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Peloton's struggles provide a hint for Lululemon

·Anchor, Editor-at-Large
·2 min read
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Lululemon should look to Peloton's challenges in a competitive market for fitness equipment and call it day on their ill-timed acquisition of connected workout machine Mirror, according to one Wall Street analyst.

"I do think they should," said Bernstein analyst Aneesha Sherman on Yahoo Finance Live (video above) when asked whether Lululemon should close down Mirror in light of Peloton's struggles.

"And my argument is there are a lot better ways to spend customer acquisition dollars than on a $500 million connected fitness acquisition," Sherman went on to explain. "But it looks like they are going to give it a go and integrate it into a Lululemon app rather than spin it off or shut it down. I don't think that's the best way to use the cash flow."

A Mirror workout. (Lululemon)
A Mirror workout. (Lululemon)

Luluemon bought Mirror for $500 million in June 2020, at a point in the COVID-19 pandemic when valuations for at-home fitness equipment like Pelotons were skyrocketing. Since then, and as the waning pandemic leads to a cooling of the home fitness market, Lululemon has unsuccessfully attempted to integrate the acquisition operationally, culturally, and from a sales perspective.

Mirror Founder Brynn Putnam stepped down as CEO in September 2021.

The athleisure company, which has also dealt with consumer backlash on the platform's lackluster user experience compared to slicker experiences such as Peloton and Tonal, offered discounts on the hardware.

Lululemon said at its recent investor day Mirror will be included in the company's new all-access pass. For $39 a month, current Mirror users will be rolled into a subscription that also includes workout content from Rumble, Y7, Pure Barre and DogPound.

Even still, Wall Street pros like Sherman remain unconvinced Mirror will be a long-term growth driver that justifies having it in operation losing money.

"The business is going to be money-losing for the next few years," Sherman added. "What they're hoping is to use it as a customer acquisition tool to broaden their loyalty to Lululemon overall."

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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