Lululemon Athletica Inc. (LULU) – Get report Shares rose higher on Tuesday after the sportswear company said it would buy the new home fitness company Mirror for around $ 500 million.
Lululemon, who previously had a private investment in Mirror, said he would sell the company’s key fitness device, a full-length mirror that customers use in an interactive fitness regimen, both online and in-store once it is sold. complete the agreement. With a 2020 execution rate of $ 100 million in annual revenue, Mirror is likely to be modestly dilutive to earnings this year, Lululemon said, before modestly adding to the group’s overall results in 2021.
At around $ 1,500 per unit, Mirror’s exclusive fitness product is cheaper than Peloton Interactive (PTON) – Get report bike, but it charges a similar monthly subscription fee of around $ 40 for live and on-demand classes.
“The acquisition of Mirror is an exciting opportunity to build on that vision, enhance our digital and interactive capabilities, and deepen our roots in working life,” said CEO Calvin McDonald. “We look forward to learning and working with Brynn Putnam and the Mirror team to accelerate the growth of personalized fitness at home.”
Lululemon’s shares were marked up 4.7% more in early trading on Tuesday to change hands at $ 308.24 each, a move that would expand its annual profit to around 33%.
“While there are very few connected profitable fitness business case studies, we see several synergistic opportunities for Lululemon,” said Credit Suisse analyst Michael Binetti.
Taking a step back, we believe a small acquisition price ($ 500 million vs. Lululemon’s $ 39 billion business value) and a valuation of ~ 5x revenue (vs. Peloton interactive commerce at> 8.5x sales from CY20 today) seems like a solid entry point for a shot at the goal of connecting LULU’s strong existing relationships with highly influential fitness instructors with its loyal / high-frequency customer base. “
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