Lululemon “Pivots Away” From MIRROR

lululemon doesn’t see a future in MIRROR.

Market watch: The activewear brand recently reported its Q4 and full-year 2022 earnings, beating analyst expectations.

• Revenue increased 30% to $2.8B.
• Operating income climbed 30% to $1.8B.
• Fiscal ’23 revenue is projected to surpass $9.3B.

Looking closer. While strong sales stole the show, the company’s connected fitness bet might be a bust.

In its earnings release, lululemon noted a $442.7M post-tax impairment charge related to MIRROR as hardware sales continued to underperform.

Having written down its $500M acquisition, lululemon CFO Meghan Frank said the smart screen is on its way out:

“We are pivoting away from the hardware-centric business that we acquired to also focus on a more efficient app-based model.” 

Going forward, Frank said MIRROR will be a “very small portion” of revenue and an equally small part of the company’s five-year plan.

But… lululemon CEO Calvin McDonald was quick to point out that the company isn’t eliminating MIRROR’s hardware. Instead, they’re simply taking a device-agnostic, app-based approach—à la Nike—to make its membership program more accessible.

Punchline: In pursuing a sweat-centric membership, lululemon had the right idea but the wrong execution. And buying into the pandemic-era connected fitness gold rush cost them $500M. Now, distancing itself from hardware, the company hopes hosting workouts from premium fitness brands and lulu ambassadors will fuel engagement.