Peloton and Lululemon finally unlock a multi-million dollar opportunity

If it’s been a while since you last worked out from the enclosure of your own home, you aren’t alone. 

Perhaps in 2020, when gyms and other fitness facilities were largely shut down, you might have found yourself happily working out from your spare bedroom or garage, humming along to whatever cheery playlist a remote instructor had queued up for your 45-minute socially-distanced sweat session. 

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But those days are largely gone, and we have been left only with the remnants of different time. Eerie reminders are all around us, if we know what to look for: a stationary bike collecting unfolded, half-dirty clothes, a treadmill with a dusty tread, a mirror and squat rack quietly folded up in the corner, untouched for months. 

Instead, many of us have been eager to get outside and utilize what was once taken from us. We now happily take our gym membership cards with us everywhere. Some of us pay $90 per month to belong to an exclusive club with a cold plunge and eucalyptus steam room. Others hike through now-reopened state or national parks for fresh air. We feel lucky to have our lives back, and perhaps even more excited to treat the gym like a catwalk, donning the latest coordinated Lululemon  (LULU) – Get Free Report, NoBull, Nike or Adidas as though it’s New York Fashion Week. 

As such, many of those pandemic darlings, such as Peloton  (PTON) – Get Free Report, which thrived as we sheltered in place and sought refuge and sanity through at-home workouts, have now been little more than dust-collectors and clothes hangers. 

Peloton’s popular stationary bike, which at the height of the pandemic had weeks long delivery times and waitlists, is now available for a discounted price of $1445 on Amazon  (AMZN) – Get Free Report. The partnership was one many of us never thought we’d see; part of Peloton’s appeal early in the pandemic was its exclusivity. Those who’d frequented lavish fitness clubs had their own enclave of trainers with a cult-following and the price point to justify it. 

Throughout the entirety of 2020, the stock crescendoed to new highs on what seemed like a weekly basis (it peaked in December 2020, at $163 per share). But, as is the case with so many good things, they too must come to an end. Peloton’s stock currently sits at less than $5 per share and the company recently dismissed its product chief Tom Cortese.  

It remains a billion-dollar company, but it’s clear that Peloton needs to reinvent itself if it wants to avoid the fate of so many other one-hit wonders. 

Peloton and Lululemon team up

Enter Lululemon, whose ill-fated acquisition of at-home workout hardware Mirror faced a similarly gruesome fall from grace following the pandemic. 

In fiscal 2021, when Mirror should have been taking off as many folks still remained inside, it represented just 3% of revenue. Things weren’t getting much better a year later. In Q4 2022, Lululemon took out $443 million in impairment charges on its hardware sector.

“As you know, since our acquisition, the at-home fitness base has been challenging,” CEO Calvin McDonald said on the March 2023 earnings call. “While members love our content, hardware sales did not match our expectations.”

Fast forward to present day, and Lululemon says it plans to cease sales of Studio Mirror by the end of 2023, instead partnering with Peloton and outsourcing its hardware to a company that’s been doing it with slightly more success all along. 

The partnership means Peloton will create tons of original content for Lululemon, while lulu provides official gear, clothing and accessories for Peloton. 

Co-branded apparel will be available for sale through Peloton starting October 11. 

The partnership marks a long and embittered battle between the two fitness stalwarts. In 2021, Lululemon moved to file a lawsuit against Peloton in LA federal court, seeking triple damages for Peloton’s alleged infringement of six design patents. The two later “negotiated a mutually agreeable settlement,” according to a Peloton spokesperson, and the at-home-fitness company removed  items in question.

Lululemon Americas  & Global Guest Innovation president Celeste Burgoyne called the new partnership exciting and praised Peloton’s legwork in the space. 

“As a leader in technical athletic apparel, this partnership will create a powerful product offering for Peloton Members and fans. Our two companies share a vision to advance wellbeing through movement, and this partnership ensures our Lululemon Studio Members will have access to the most expansive and dynamic offering of fitness content possible,” she said.

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