- Lululemon slashed its sales forecasts for the year for its Mirror brand on Thursday.
- The company acquired Mirror for $500 million in 2020.
- Increased competition and the reopening of gyms have dented sales at some home fitness brands.
On Thursday, reporting its third-quarter earnings results, Lululemon slashed its outlook for Mirror sales for 2021 to between $125 million and $130 million. Previously it had estimated sales would reach between $250 million and $275 million.
“As you know, 2021 has been a challenging year for digital fitness,” CEO Calvin McDonald told investors in a call Thursday. “We have seen increasing pressures on customer acquisition costs that are impacting the entire industry.”
He continued: “We will not chase growth at any cost. We simply don’t need to, but we will invest to define our unique proposition and to bring Mirror to market through our owned marketing channels.”
When Lululemon acquired Mirror in the summer of 2020, the US was in the midst of a pandemic-driven home fitness boom. At the time, analysts touted the deal as a triumph, saying that it would position the company well for long-term growth.
“It really puts Lululemon in a new light,” Greg Kahn, CEO of GK Digital Ventures, told Insider at the time. “It is almost future-proofing the company and saying: ‘We are moving beyond our traditional commerce structure.'”
But since then the market has become more crowded with new players and, with customers returning to gyms, some of the leading home fitness players have seen growth falter. Last month, Peloton, the pioneer of high-tech home fitness, reported weaker-than-expected first-quarter earnings results and lowered its forecast for fiscal 2022.
Lululemon has also faced unique challenges with its Mirror acquisition.
In conversations with Insider’s Bethany Biron, a group of current and former Lululemon and Mirror employees described the struggle to integrate the two companies, which resulted in internal tension. Mirror’s CEO Brynn Putnam stepped down in September and has not yet been replaced.
Analysts say that recent discounts offered on its $1,495 Mirror fitness machine indicate that consumer demand is slowing.
“We have observed Lululemon offering Mirror at $500 off and competitors also slashing prices in an effort to gain customers,” B. Riley analyst Susan Anderson wrote in a note to clients Friday. “Management specifically noted that the digital fitness industry has been challenging in 2021, which we believe is due to consumers moving on to returning back to the gym and other pre-COVID activities throughout the year,” she said.
BMO Capital Markets analyst Simeon Siegel shared similar thoughts in a note to clients on Thursday.
“We have been monitoring promotions within the broader Connected Fitness space, where deals have been clearly ramping up, validating our expectation that competition (and promotions) are growing,” he said.