In this episode, John Peters and Matt Tingler, Managing Director of Robert W. Baird, the leading middle market investment bank for the active lifestyle industry, broke down the deal of Lululemon acquiring Mirror. They gave their thoughts on what’s next in the fitness space and discuss some winners and losers from the deal.
3:38 – Mirror’s estimated valuation of $500 million: Matt says, “I think Lululemon, what they saw in the business in Mirror was a company that they can scale and leverage under their ownership in ways that will create a lot of value for them.”
5:00 – Did Mirror exit too early?: Matt says, “I think some of the owners wait too long to sell their businesses. And as a result, they either can never get to a transaction or the valuation of the deal in the future for them is much lower than what they would’ve got at an early point.”
7:40 – Lululemon’s Sweat Life mission: John says, “Lulu, to me, this brings them into other markets like meditation, which is fast growing and obviously in yoga, right? I mean, could you imagine a Mirror subscriber taking a Lululemon ambassador led class, and then potentially even ordering clothes off of the Mirror directly with one touch.”
10:13 – Lululemon leveraging Mirror’s equipment: Matt says, “If you think about fitness in the future, I think fitness is going to be more holistic. It’ll be more than just the transaction of an exercise. I think it’ll go into areas such as mental wellness, nutrition, diet, things of that nature. And being able to leverage the Mirror equipment, to have that to a conversation with the consumer could be really powerful.” John says, “It kind of gets them into a new market, a broader market, which is wellness. You know, people claim that wellness is a $4 trillion industry.”
12:00 – Did other fitness lifestyle companies win in this deal?”: Matt says, “I think we will see activity in the market. Yeah, there’s been a lot of innovation.”
14:45 – Brick and Mortar Gyms vs at Home Fitness: John says, “I just feel like there are way too many doors in the fitness space. I think that, if anything, this obviously helps Tonal and Echelon, who’s really doing well right now. Got to think this raises their valuation.”
15:45 – Losers in this deal: John says, “Lululemon saw digital revenues 70% year over year growth. They mentioned the word ‘digital’ 22 times in the earnings call. I think the biggest loser in this deal, if there is a loser, it’s gotta be Under Armour.”