(July 9): More than eight years ago, I wrote a column for The Edge about athleisure firm Lululemon athletica, which had high margins, strong growth and a niche following. In apparel retailing, where margins are slim, technology is a disruptor, fixed costs are high and competition is fierce, Lululemon’s “differentiated” business model stood out. The stores of the Vancouver-based yoga-wear firm had become temples to the fledgling brand, where fans would try out stretch yoga pants, buy mats or tote bags and hang out with other yogis. I also noted at the time that Lululemon’s stock was starting to get Wall Street’s attention.
Eight years on, Lululemon has a cult following, and over the past 18 months, it has been one of the best-performing retailing stocks on Wall Street. From a scratchy start-up in Vancouver selling overpriced yoga gear, Lululemon has emerged as a premier upmarket global retailer. Last week, it splurged US$500 million ($696 million) to acquire digital in-home fitness start-up Mirror, a fitness TV firm that leverages smart mirror technology, and has been dubbed the Peloton Interactive of fancy workout furniture, after the iconic stationary exercise home bike firm. “Mirror’s target customer is very similar to Lululemon’s higher-income, active lifestyle customer base,” notes Bank of America analyst Rafe Jadrosich in a recent report.
Founded two years ago by ballet dancer Brynn Putnam, when she realised she was pregnant and needed more in-home workouts, Mirror has grown into a serious fitness play in less than 24 months. Putnam built a prototype with a cheap tablet, a piece of glass and Raspberry Pi, a small, low-cost computer. An Instagram post by singer Alicia Keys, an early customer, went viral and helped Mirror raise money for expansion. Revenues of the interactive mirror maker are set to exceed US$100 million this year.