Lululemon acquires the in-home fitness company Mirror for $ 500 million, the retailer said on Monday. This marks his first acquisition with the bet that more people will train at home.
The Lululemon share gained almost 4% after close of trading.
Upon entering into the contract, Mirror will be managed as an independent company within Lululemon, and its current CEO, Brynn Putnam, will continue to serve as Mirror’s CEO and report to Lululemon’s CEO, Calvin McDonald.
The transaction, which will be paid in cash, is expected to close in the second quarter of fiscal 2020.
Lululemon first invested $ 1 million in Mirror in mid-2019. Mirror, launched in 2018, has raised $ 72 million from investors to date.
The company offers weekly live classes through its wall-mounted mirror, in addition to on-demand workouts and one-on-one training. The mirror costs $ 1,495, and subscribers pay $ 39 a month to stream the classes.
Mirror is viewed as a competitor to other home exercise equipment manufacturers, including Peloton. Many former gym users came to this equipment during this time the coronavirus pandemicThe gyms had to close to curb the spread of Covid-19.
When Peloton reported a profit in May, the company said last quarter sales were up 66% year over year to $ 524.6 million. The company announced that it had ended the quarter with a connected fitness subscriber base of more than 886,100 people, an increase of 94% year over year.
Mirror currently has “tens of thousands” users.
In 2019 Lululemon detailed The triple vision of being a brand that not only sells clothes like leggings and sports bras, but encourages people to sweat more.
“The acquisition of Mirror is an exciting opportunity to build on this vision,” McDonald said Monday. He added that the fitness company is expecting sales of more than $ 100 million this year and that it will either be balanced or slightly profitable in 2021.
“In itself, it’s a sales business … and we know we can continue to expand it,” McDonald said in an interview with CNBC’s Sara Eisen. “We are seeing a completely new model for incremental business.”
He also believes the deal could help Lululemon sell more workout clothes to men and women, though that’s not the main goal.
“It’s not an acquisition to just sell more clothes,” he said. “We think it will be a by-product.”
Lululemon, like many retailers, has been hit by the pandemic.
In its last quarter, reported earlier this month, net income was $ 28.6 million, or 22 cents a share, compared to $ 96.6 million or 74 cents a share a year ago. Total revenue decreased 17% from $ 782.3 million in the previous year to $ 651.96 million.
Lululemon announced Monday that the existing liquidity includes $ 800 million in cash, an existing $ 400 million revolving credit facility, and a new $ 300 million credit facility.
Lululemon shares have risen by around 26% this year. It has a market cap of around $ 38.3 billion.