Mirror Mirror on the Wall
Lululemon Athletica does more than sell athletic apparel. The retailer has completed a bolt-on acquisition for in-home fitness brand, Mirror. The deal is worth $500 million.
Mirror is a bit like Peloton, but instead of a bike, think Mirror of Erised from ‘Harry Potter and the Sorceror’s Stone.’ Seriously. The one that reflects the deepest, most desperate desires of our hearts. You shell out $1,495 for one of those, and your Mirror comes to life as an interactive screen, complete with home workout routines guaranteed to get you the perfect body.
You can join after-work classes or get one-on-one coaching, but that’s not the point. The point is that it sells, and there’s obvious synergy for Lululemon in this deal. Its customers can demo and buy apparel through the Mirror.
There’s always a variant view, so when the dust settles, bulls will have to explain to bears why this is better than going outside to exercise for free. If this is where the world’s going, Mirror could soon be under threat from a touchscreen toaster promising to do the exercise for us!
Lulu’s spent a contentious amount on this deal, but we don’t know anything about Mirror’s profit margins. If you’re an investor picking up shares, consider it a big pre-flop poker bet. Lululemon will reveal Mirror’s economics at a coming earnings call, the good or the bad news, your upside, or your downside. It’s sounds like a pure gamble, but no…
Your starting hand can be judged by the Invstr community’s 88% bullish stance on Peloton already, Mirror’s main rival that probably has similar economics. If there’s also good news from Lulu’s post-corona apparel business, even better, that’s your kicker, and Lulu wouldn’t have made this mega move if it didn’t see something promising financially!
Peloton’s also makes a good hedge. If the Mirror bet doesn’t work out, you could win back your losses as Peloton investors’ celebrate!