Peloton and Lululemon have embarked on a five-year partnership, making Peloton the exclusive digital fitness content provider for Lululemon, marking a strategic move for both brands to capitalize on each other’s strengths, with Lululemon focusing on athletic apparel and Peloton on digital fitness content.

As part of this partnership, Lululemon will become the primary athletic apparel provider for Peloton, while select Peloton instructors will become Lululemon Ambassadors, further merging their brands.

Additionally, Peloton and Lululemon will collaborate on co-branded merchandise, which will be available for sale starting October 11, expanding the presence of both companies in the athleisure market.

This partnership signifies a strategic shift for Lululemon as it plans to discontinue the sales of the Lululemon Studio Mirror before the end of the year. The Studio Mirror was originally aimed at competing with Peloton in the at-home fitness market but faced challenges and underperformance.

Furthermore, Lululemon will discontinue its digital app-only membership tier on November 1. However, the company will continue to provide ongoing service and support for Mirror devices.

Peloton’s stock surged by nearly 30% in after-hours trading following the announcement, while Lululemon’s stock remained relatively unchanged.

While the financial aspects of the partnership, such as revenue sharing from co-branded apparel and Studio member usage, may not be significant, both companies anticipate long-term benefits in terms of brand equity and customer acquisition.

Peloton, which has faced challenges in growing its revenue following the peak of its popularity during the COVID-19 pandemic, expects increased traffic to its stores and website as Lululemon members use its workout app, including the 13 million free members offered free Peloton workouts.

In August, Peloton’s stock experienced a sharp decline of over 20% in a single day due to a slowdown in subscriber growth and higher-than-expected costs related to a bike seat recall.

This partnership allows both Lululemon and Peloton to focus on their core competencies, with Lululemon specializing in athletic apparel and Peloton continuing to provide digital fitness content, potentially leading to a mutually beneficial relationship.