HomeMarket NewsMicro Cap StocksAnalysis: Lululemon's Partnership with Peloton Shifts Focus from MIRROR Setback

Analysis: Lululemon’s Partnership with Peloton Shifts Focus from MIRROR Setback

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The Strategic Partnership Between Lululemon and Peloton: An Analyst’s Perspective

Rick B. Patel, an analyst at Raymond James, considers Lululemon Athletica Inc’s (LULU) partnership with Peloton Interactive Inc (PTON) to be a positive move for the company. Patel believes that the impact of the setback caused by MIRROR has already been factored into Lululemon’s stock performance.

The Five-Year Partnership Announced by Lululemon and Peloton

Lululemon recently unveiled a strategic partnership with Peloton, with the agreement spanning five years. Under this partnership, Peloton will serve as the exclusive provider of digital fitness content for Lululemon, while Lululemon will become Peloton’s primary athletic apparel partner.

The Value of the Partnership: Reframing the MIRROR Acquisition

According to Patel, this partnership provides an opportunity for Lululemon to extract value from its acquisition of MIRROR in 2020. Patel notes that there were reports of Lululemon attempting to sell the MIRROR business, but those efforts were unsuccessful. As a result, Lululemon took a significant impairment of $442.7 million for MIRROR in the fourth quarter of 2022.

Increased Distribution and Visibility for Lululemon

By selling co-branded products in Peloton stores, Lululemon will enhance its distribution channels and increase visibility among fitness-conscious consumers. Additionally, with Peloton as its exclusive fitness content partner, the Lululemon brand will be able to reach a wider global audience. Discontinuing the sale of MIRROR will also free up inventory and working capital that can be better utilized in other areas, according to Patel.

Focusing on Core Growth: Apparel

Patel suggests that the partnership allows Lululemon’s management to prioritize its core growth engine: apparel. With a renewed focus on apparel, Lululemon can further strengthen its position in the market.

Stock Performance

As of the latest closing price, Lululemon shares are trading higher at $380.65, representing a 0.40% increase.

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