Peloton Interactive (PTON) -) shares surged higher in early Thursday trading after the connected fitness group reached a five-year content and apparel partnership with Lululemon Athletic (LULU) -).
The deal, unveiled late Wednesday, will see Pelton become the exclusive content provider for Lululemon, in terms of its connected fitness classes and offerings, with the sportswear group becoming Peloton's primary athletic apparel partner on its website and in its retail stores.
Lululemon also said it would stop selling its 'Mirror' fitness hardware, which it purchased for $500 million in 2020, by the end of the year, but would continue servicing existing customers with content from Peloton. .
“As a leader in technical athletic apparel, this partnership will create a powerful product offering for Peloton Members and fans," said Lululemon's Celeste Burgoyne. "Our two companies share a vision to advance wellbeing through movement, and this partnership ensures our lululemon Studio Members will have access to the most expansive and dynamic offering of fitness content possible.”
Peloton shares were marked 13.8% higher in pre-market trading to indicate an opening bell price of $5.29 each. Lulu Lemon shares, meanwhile, edged 0.6% high to $381.49 each.
The partnership may provide Peloton with a boost in both connected fitness members and cash flow, issues highlighted in a disappointing fourth quarter earnings update late last month.
Peloton said its fiscal the year with a paid subscriber base of 3.078 million, just shy of its own forecasts. But it added that that tally would fall to between 2.95 million and 2.96 million over the three months ending in September.
CFO Liz Coddington suggested at the time the group was "within striking distance of achieving free-cash-flow break-even", even as it forecast revenues to decline to between $580 million and $600 million over the current quarter.
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