Exercise-bike manufacturer Peloton Interactive Inc. and athleisure giant Lululemon Athletica have announced a new partnership in the connected fitness realm. This collaboration comes at a time of fierce competition in the athletic gear industry, particularly following the economic reopening after the pandemic.
Scheduled to launch next month, the five-year partnership establishes Peloton as Lululemon’s exclusive digital fitness content provider, while Lululemon becomes Peloton’s primary athletic-apparel partner. As part of this agreement, select Peloton instructors will also promote Lululemon’s clothing. Furthermore, Lululemon has decided to discontinue sales of its Lululemon Studio Mirror, a digital mirror offering workout videos and fitness data to compete with Peloton, by the end of this year.
Following the announcement, Peloton’s stock saw a 5.7% increase, while Lululemon’s stock remained relatively unchanged.
Analysts at Jefferies remarked that the impact of this deal on Lululemon is expected to be minimal. They expressed concerns about a potential slowdown in Lululemon’s business as the company faces stiff competition in the athletic clothing sector.
The partnership will span across North America, the U.K., Germany, and Australia. Beginning on October 11, co-branded Lululemon products will be available both in-store and online at Peloton locations in the United States, the U.K., and Canada. By March, these products will be launched in Peloton’s other markets. Additionally, starting from November 1, Lululemon Studio All-Access Members will have access to Peloton classes for $39 a month.
This collaboration has the potential to bring exciting opportunities for both Peloton and Lululemon in the connected fitness landscape. It will be fascinating to witness the impact of this partnership on the respective companies and the overall market.
Lululemon and Peloton Partnership: Analysts Weigh In
In 2020, Lululemon made a strategic decision to acquire Mirror, a move aimed at competing with Peloton as more people turned to home workouts during pandemic-related lockdowns. According to Wedbush analyst Tom Nikic, this acquisition was seen as a misstep for Lululemon. However, the recent partnership between Lululemon and Peloton is viewed positively by analysts, providing benefits for both companies.
Benefits for Lululemon
Nikic believes that the partnership ends the saga of Lululemon’s previous strategic misstep. While Mirror accounted for only about 1% of Lululemon’s sales, it had a negative impact on per-share profits. With the deal in place, Lululemon’s bottom line is expected to see modestly favorable results.
Benefits for Peloton
The partnership also brings positive outcomes for Peloton. JPMorgan analysts point out that it allows Peloton to leverage its core content creation capabilities and drive low-cost customer acquisition. Additionally, the partnership enables Peloton to focus on its core business of connected fitness and move further away from non-core apparel.
Apparel Opportunities for Peloton
Conversion to Connected Fitness Subscriptions
While enhancing the digital app strategy, Kocharyan raises an important question regarding successful conversion. Will co-branding and exposure to Peloton digital content drive meaningful conversion to connected fitness subscriptions? This remains a key consideration in the partnership’s overall success.
In conclusion, the Lululemon and Peloton partnership brings significant advantages for both companies. Lululemon can overcome its previous misstep and improve its bottom line, while Peloton can focus on its core business and expand its presence in the apparel sector. However, the success of conversion to connected fitness subscriptions remains uncertain.
