Here are my thoughts on the Lululemon acquisition of Mirror. No, it's not about Mirror selling more clothes. It's about Lulu’s core business, physical store retail, being in bad shape and no matter how great the Lulu brand is, there are only so many pants a store can sell. 1/8
Lulu has promised investors revenue will hit $10B+ by 2023. Historically, retailers hit big numbers by opening stores. Now though, even the best malls are on life support and anchor tenants like Nordstrom are shutting their doors. 2/8
The “new door” strategy isn’t viable. In its last earnings call, revenue was down 17%, mostly due to Covid. eComm which is now 50+% of revenue and growing triple digits in Covid could not get it to positive territory. The numbers signal to me maturity in the next 5 years.3/8
Meanwhile Peloton (Mirror’s comp) was up 66% in the qtr ending March (ie before its Covid bump). This brings me to 3 reasons I think Lulu bought Mirror: a. Diversification. Hat’s off to the management team for finding an alternative $$ stream while both brands are still hot. 4/8
Retailers need to be like the Tech Titans and change their revenue mix. Best case, this ends up being like YouTube to Google or Instagram to Facebook. 5/8
b. Media dollars. I’ve been saying retailers are the next media moguls for years, and this gives Lulu a platform and content. Content rarely drives commerce but content does drive ad dollars. And Mirror is just one distribution channel. 6/8
They can take the content anywhere and make some high margin ad dollars. c. Experimentation. Sure, they could try magic mirrors, live chat with customer service, even a platform for other brands like Echo, though this would be a stretch: 7/8
they don’t have that type of tech talent and they’re not Amazon. When malls reopen, there could be some Mirror demos in Lulu stores, maybe Mirror takes over the Ivivva spaces. Or maybe they just head down the path of a very diversified fitness conglomerate. 8/8
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