American exercise equipment and media company Peloton Interactive Inc (NASDAQ: PTON) has partnered with Canadian athletic apparel retailer Lululemon Athletica Inc (NASDAQ: LULU). The two companies have officially entered a partnership that will last five years and introduce Peloton content to Lululemon’s app. In exchange, Lululemon will be the primary athletic apparel partner for Peloton. Furthermore, the deal will also make some Peloton instructors Lululemon ambassadors.
In response to the announcement, Peloton stock rose by more than 15% in after-hours trading. As of writing time, PTON is at $5.39, nearly 16% above its $4.65 close. Unfortunately, Lululemon shares did not share the same rise. LULU only climbed 0.03% to $379.25 from its $379.14 close.
Lululemon and Peloton Reached Deal for Both Companies to Access Exchanged Benefits
Neither party has disclosed shared revenue or any other specific terms of the deal. However, Lululemon says it will no longer sell Mirror, a product that allows users to stream live and on-demand workout videos. Although the company plans to continue providing support for existing Mirror owners, Lululemon will discontinue support for new users at the end of this year.
Paying users of the Lululemon Studio app and Mirror will gain access to thousands of Peloton videos, while non-paying users will only access a limited amount of content. Also, as part of their partnership, both companies will host in-person community events.
In addition, the deal will see Lululemon stopping production of its own exercise videos, along with any third-party content.
Suspending its Mirror business is not news as the company was reportedly considering selling the unit. This happened after Lululemon’s hardware sales missed projections, causing the firm to take impairment charges worth $443 million in fiscal Q4 2022.
Both companies seem to focus heavily on content production since sales of physical fitness products have tanked. In a statement, a Lululemon representative said:
“…we are shifting the focus of Lululemon Studio from a hardware-centric offering to one that is also focused on digital app-based services going forward. This work is underway, and our strategy will enable us to create long-term value and build a larger community of guests with a deeper connection to Lululemon.”
Peloton stock has had a poor year, recording a 25.48% loss over the last month, and over 36% in three months. Year to date (YTD), PTON has lost 41% and 43.57% over the last year. On the other hand, Lululemon has fared a little better. The company only gained 0.64% and 0.77% in the last 1 month and 3 months, respectively. However, LULU has risen 22.56% in 1 year, and more than 18% YTD.
Last month, Coinspeaker reported that Peloton stock crashed about 30% in premarket trading after the company posted poor figures for fiscal Q4 2023. Peloton’s loss per share did not meet expectations as it recorded 68 cents, over the 38 cents analysts polled by Refinitiv expected. The company also announced a sales loss of 5.3%, to $642.1 million from 678.7 million.