Lululemon Athletica (LULU 0.12%) had big expectations when it acquired Mirror, the at-home digital workout platform. But sales trends are slowing in late 2021 according to the latest quarterly update.
In this video, from "Beat & Raise," recorded on Dec. 10, Fool contributors Demitri Kalogeropoulos and Rachel Warren discusses the slowdown and what it might mean for the growth stock.
Demitri Kalogeropoulos: Let me cover this question about Mirror. That's a good question. Mirror was this company that they bought I think late 2019. I don't know if you've seen a picture of it. Really cool, or seen in the product in use. It's this wall mirror that you can do workouts in front of and it's a digitally immersive workout experience with projected stuff onto the mirror. It's amazing to see and it's really cool because they were getting into that digital workspace. It wasn't so good news in that regard. Management did reduce their outlook for Mirror not by a whole lot, and again, it's just a small part of their businesses. It's something like 3% of annual revenue.
They did lower their expectations. It's not a really great market right now. This particular niche, digital workouts for some reason I think people are just, I don't know. But you see with Peloton and companies like this, they're not getting anywhere near as much engagement as they did last year. That's not really the case for Mirror, but the industry doesn't seem to be growing as quickly as it was. Who knows why.
The best explanation and the most obvious, I guess, is that people are a little tired of all this niche I guess after being in the pandemic and being stuck at home and doing the workouts. It's a lot of why we're seeing people return to stores for shopping a little bit more. The pendulum swinging all back in the other direction of in-person workouts and gym sessions.
Mirror isn't a runaway winner at the moment, but management is just as excited as they were when they bought it in terms of the long-run potential but it's just not going to blow the lights out in 2021.
Rachel Warren: I always thought that was the fascinating part of their business and I'm surprised it hasn't been quite the growth trajectory investors have been hoping as things reopen and I do think you have this middle ground of people that are still home and working from home, but I think also people really want to get out and meet people again and we know that going to the gym, for example, is one way to do that. I guess it's not really surprising that we're seeing a bit of a downturn in that particular area.
