In 2020, the world looked very different.
City streets remained silent at peak hours, intrepid individuals wore masks if they dared shop for groceries, and it seemed like everyone was teleworking on Zoom (ZM) and working out from the confines of their safe home garage or basement.
Many of those fitness fanatics turned to Peloton (PTON), which had its stock crescendo to new highs on what seemed like a weekly basis for the entirety of that unusual year (it peaked in December 2020, at $163 per share).
Never one to miss out on a trend, lululemon (LULU) quickly scooped up Mirror -- another at-home fitness startup -- in June 2020 for $500 million.
"lululemon Studio Mirror is the centerpiece of your lululemon Studio Membership," the site gleams. "Choose a workout to stream, see your reflection alongside your trainer on a full HD display, and uncover the Community Camera for live feedback on form. All in an elegant design that fits any space."
And it all starts at the very reasonable price of $995 -- a steal considering most Peloton bikes were starting at nearly $1400 at the time.
But all good stories must come to an end. Gyms reopened, people remembered how nice it feels to run outside in the sunshine, and Pelotons began selling (sometimes secondhand) on Facebook and Amazon (AMZN).
So too, the story went, for lululemon. Except, just as it was late to the at-home gym craze, it's late to the selling of such unwieldy contraptions, too.
Lululemon Explores Selling Mirror
Canadian-based lululemon is reportedly looking to eliminate the money pit that has been Mirror. It just hasn't been able to convert enough lulu fanatics into Mirror fanatics (maybe because Mirror is essentially a giant iPad/tablet).
"We want everybody sweating on a Mirror to be in Lululemon and we want everybody sweating with Lululemon to be engaging and using a Mirror," CEO Calvin McDonald said in a March 2022 earnings call. But in fiscal 2021, when Mirror should have been taking off as many folks still remained inside, it represented just 3% of revenue.
In Q4 2022, lululemon took out $443 million in impairment charges on its hardware sector.
"As you know, since our acquisition, the at-home fitness base has been challenging,” McDonald said on the March 2023 earnings call. “While members love our content, hardware sales did not match our expectations.”
In a world of tightening budgets and shortening purse strings, fewer consumers are able to justify a $118 pair of leggings -- let alone a mirror that costs around $1,000.
"As we continue to invest prudently in this business, we are evolving the model from being focused on hardware-only to offering content through a digital and app-based solution as well,” McDonald continued “The new, more efficient app-based model will launch this summer at a lower monthly subscription rate.”
It's not clear who might buy Mirror -- and what its sales price could be. It is probably safe to say, however, that the company will go for far less than lululemon acquired it for in 2020. And while it could take some time for the company to recoup the loss, its growth prospects remain quite healthy. Q4 revenue was up 30% and comparable store sales were up 27%. Year-over-year revenue was also up an impressive 30% to $8.1 billion.
Perhaps people enjoy wearing expensive leggings, but looking at them in the mirror is simply a bridge too far.
