Peloton + Lululemon: What You Need to Know

After the market closed on Wednesday, Peloton announced a 5-year partnership with lululemon. The stock jumped 12.5% in early trading only to give back all of the gains at the time I’m writing.

I think this is a HUGE deal for Peloton as it transitions to being primarily a digital fitness company. Before I get to the strategy impact, let’s go through the details.

Peloton’s lululemon Deal

Part 1: Digital Fitness Content (PTON → LULU)

First part of the partnership is Peloton’s digital content being “repackaged” under lululemon’s memberships.

This allows Peloton to further leverage its content and allows lululemon to get out of its money-losing fitness content and hardware business.

The Studio All-Access subscription is $39 per month and includes a variety of benefits from studio classes (IRL partners) to discounts.

The financial terms of the partnership were not announced and we don’t know how many members lululemon has, but previously announced App One partnerships were $6.99 per month, so the financial terms are likely in that range. We also know that:

• lululemon is discontinuing the Mirror, which is currently required for the membership.

• “lululemon will also discontinue its digital app-only membership tier on November 1, 2023, and current lululemon Studio app-only members will be offered an opportunity to become a Peloton App One Member.“

It certainly looks like Peloton will take over the digital content side of lululemon memberships, which will eliminate a competitor and add incremental customers and revenue for Peloton.

Part 2: Apparel (LULU → PTON)

The other part of this deal is lululemon “will become the primary athletic apparel partner to Peloton“. This is a win for both companies.

• lululemon increases its brand reach and eliminates a potential brand competitor.

• Peloton gets a high-quality partner and can reduce spending/focus on apparel.

This is a win-win for both companies. Enough said!

Peloton’s Strategy

The reason I think this agreement is a big deal for Peloton is because of the company’s strategy in digital fitness.

We need to look at Peloton as a digital fitness content company — not a bike company. And with that framing, the asymmetric potential is in Peloton becoming the biggest digital content company in the world.

As I highlighted in the smiling curve article, if this is a “winner-take-all” market (as most digital markets are), the company with the most customers and distribution will win. With this move, Peloton turns a competitor into a partner and vastly increases the reach of Peloton’s content.

Strategically, the deal makes all the sense in the world. What we don’t know is the financial impact or how many subscribers lululemon is bringing to the table.

We’ll learn more when Q3 earnings are released and I, for one, think this could be a turning point to more partnerships with companies like LA Fitness, Anytime Fitness, Snap Fitness, Nautilus, and more.

Distribution is now the name of the game for Peloton.

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