Lululemon Athletica Inc. has entered into a five-year partnership with Peloton Interactive Inc., which will involve the utilization of Peloton’s online workouts and collaboration on apparel. This strategic agreement marks the end of Lululemon’s unprofitable venture into digital fitness equipment.
Under this partnership, Lululemon will produce co-branded clothing that Peloton will sell through its website and retail stores. In return, Peloton’s fitness content will be made available to users of the Lululemon Studio Mirror, a $995 device that enables workouts in front of a 43-inch screen, as well as the apparel company’s free digital app.
Mirror subscribers, who currently pay a $39-per-month fee, will have the option to access Peloton classes through the Lululemon app. Lululemon will cease producing its own exercise videos next year and will not feature content from third-party sources as part of this arrangement.
Peloton’s stock surged approximately 30% in extended trading following this announcement, while Lululemon’s stock remained relatively stable.
Additionally, Lululemon intends to discontinue sales of the Mirror hardware by the end of 2023. The digital companion app, which includes content from both Lululemon and Peloton, will also be discontinued for new users at that time. This shift emphasizes serving existing customers.
Users can expect these changes to take effect starting November 1, with Peloton also providing content for Lululemon’s free Essential app tier. Meanwhile, Lululemon will discontinue its relatively new $12.99-per-month digital-only subscription, directing users toward the Peloton app as part of the partnership.
Peloton executives believe that this deal reinforces Peloton as the leader in connected fitness and anticipates it will boost traffic to their retail stores and hardware sales.
While Lululemon will continue to offer support for the Mirror, this partnership enables the company to move away from a challenging business venture. The Mirror unit had been a financial burden, leading to layoffs and write-downs of its value.
As part of the apparel agreement, Peloton will begin selling co-branded clothing on October 11, initially in the US, UK, and Canada, with expansion to Australia and Germany by March. Peloton instructors will also wear co-branded clothing in future video content, and the companies plan to collaborate on in-person community events.
Lululemon and Peloton have taken different paths since the onset of the pandemic, with Peloton struggling to recover from a post-lockdown decline in sales and Lululemon experiencing growth and gaining market share. This partnership reflects Peloton’s efforts to regain growth by collaborating with other major brands.