Lululemon strikes deal with Peloton that will see yoga wear company stop making the Mirror

Yoga wear giant Lululemon has struck a deal with smart exercise bike company Peloton that will see the two companies stop fighting on each other’s turf and instead work together to sell gear, equipment and fitness classes.

The deal, announced late Wednesday, will see Vancouver-based Lululemon Athletica Inc. become the “primary athletic apparel partner” of New York-based Peloton Interactive Inc., which will in turn become the “exclusive digital fitness content provider” for Lululemon for the next five years.

That’s a marked departure of the tone between the two companies in recent years, as they have been competing in stores and in court for a bigger share of the growing market for exercise and related healthy living businesses.

Lululemon accused Peloton of aping its apparel in a lawsuit in 2021, before settling last year.

Now, instead of squabbling over yoga pants, the two companies have decided to work together to release a line of co-branded clothing starting next month.

But the deal is not just about clothes: Lululemon says it is getting out of the exercise equipment business, too, by discontinuing its Mirror device by the end of this year — but it will continue to provide ongoing service and support for existing devices out there.

Lululemon spent $500 million to buy the fitness startup, which makes interactive mirrors in the summer of 2020, but since then sales have been sluggish and the division hasn’t been a profit generator for Lululemon.

Subscribers to Lululemon’s digital services will also get access to various levels of Peloton digital classes, depending on their payment tier.

As part of the collaboration, some Peloton instructors will become Lululemon ambassadors, while Lululemon will sell co-branded clothing.

Poonam Goyal, an analyst who covers the retail space for Bloomberg Intelligence, says the deal is a smart one for both sides.

“Lululemon’s decision to partner with Peloton and move away from its own fitness app makes sense to us, and returns focus to expanding its core apparel business,” she said.

“The partnership will help feature Lululemon’s athletic wear in consumers’ exercise regimens, helping build brand heat through Peloton’s established roster of fitness instructors.”