Lululemon is looking to sell MIRROR. Despite Tonal’s recent down round and Peloton’s share price drop, the activewear brand might still be able to make a gain on the sale of its connected fitness equipment business.
Lululemon is rumored to be exploring the sale of its connected fitness hardware business MIRROR, which it acquired in the early days of the pandemic.
But the post-Covid comedown has been hard on connected fitness equipment players — which gained a lot of attention during the height of the pandemic from locked-down consumers — leading to disappointing hardware sales for MIRROR, as mentioned on Lululemon’s most recent earnings call:
“The overall at-home fitness space remains challenged. MIRROR hardware sales during the holiday season came in below our expectations”
But could Lululemon actually still recoup its investment in MIRROR?
To determine how much Lululemon could sell MIRROR for, we used CB Insights’s data including:
- Competitor data
- Funding rounds
- Valuation
- Revenue
- Price/revenue ratios
- Earnings transcripts data
Let’s dig in.
The company paid $500M for MIRROR in June 2020. This was the equivalent of a 5x multiple on its run rate revenue at the time of $100M, according to our data.
However, valuations in the space have taken a hit recently with 2 key competitors seeing their value drop by ~60%:
- Shares in Peloton, the largest player in the connected fitness space, are down nearly 95% since reaching their peak price in late 2020. The company’s current market cap of $3.3B is 59% below even its pre-covid IPO valuation of $8.1B (in many ways a better benchmark for Peloton in today’s market which is far less Covid-driven).
- Tonal, which offers connected strength training equipment, saw its valuation drop from $1.6B to $600M during a recent fundraising round.
Assuming that MIRROR is similarly affected by these market shifts, then the data suggests that Lululemon would only be able to sell MIRROR for around $200M – 60% of $500M.
But that perspective doesn’t take into account 2 key data points:
- The price/revenue ratio MIRROR could achieve now vs. its initial acquisition
- Revenue growth since MIRROR’s acquisition
