North American athletic apparel retailer Lululemon Athletica is getting into the home fitness business with its upcoming purchase of fitness tech firm Mirror. The company announced on Monday that it has reached an agreement to acquire Mirror for $500 million.
The Vancouver-based apparel company is betting on a massive shift in the fitness industry, particularly a shift in more people choosing to exercise at home amid the ongoing coronavirus pandemic. Following its announcement, Lululemon's share prices surged by as much as 4 percent in after-hours trading.
Under the acquisition deal, Mirror will be allowed to run as a standalone company while being Lululemon's subsidiary. The management structure of the company, including its chief executive officer, Brynn Putman, will remain unchanged. However, Putman will have to directly report to Lululemon CEO Calvin McDonald.
McDonald stated on Monday that the acquisition presents an exciting opportunity for the company to achieve its vision. The executive was referring to the company's previously announced goal of being more than just a clothing brand. He added that the acquisition should also help the company achieve its revenue goals for this year and the next.
Apart from encouraging more people to exercise at home, promoting Mirror's products will also result in an increase in sales of Lululemon's workout clothing. Similar to other retailers, Lululemon's business had been greatly affected by the economic downturn caused by the pandemic. For its most recent quarter, Lululemon reported a 17 percent drop in its total revenues, which fell from $782.3 million to $651.96 million.
The acquisition, which will be paid in cash, is expected to be completed by the second quarter of Lululemon's fiscal 2020. Before the purchase, Lululemon was already a Mirror investor. The company invested around $1 million months after the company was launched in 2018. Mirror has so far raised more than $72 million from various investors since it was established.
Mirror mainly sells its high-tech wall-mounted and full-length mirrors, which when turned on transforms into a home workout training tool. The company also offers live weekly classes through the device as well as one-on-one personal training sessions. The company sells its mirrors for around $1,495, while it charges users a subscription fee of $39 per month to stream live classes.
Since the spread of the coronavirus pandemic, Mirror has seen a massive uptick in its sales as people switched to working out at home. With fitness studios and gyms remaining mostly closed, Mirror's on-demand fitness and training sessions have become a massive hit.