Lululemon invests in high-tech cycling wear startup 7mesh

Dive Brief:

Lululemon Athletica Inc. has made a minority investment in Canadian cycling apparel company 7mesh, the yoga apparel maker announced on Monday in a press release.
In addition to the financial interest by Lululemon, (which was advised by Tim Dahms, managing director at Financo), the two sports apparel makers have forged a strategic partnership that will have 7mesh’s product development team working with Lululemon’s innovation teams at its Whitespace research and development unit.
Lululemon last quarter corrected a sales tumble from the previous quarter, which the company said was the result of a bland spring merchandise offering. But its previous growth has been tempered by a series of merchandising and marketing snafus and, mostly, a loss of market share as competitors have entered the athleisure space the company innovated.

Dive Insight:

Headquartered in Squamish, British Columbia, 7mesh is physically close to Lululemon’s own Vancouver home, but, more importantly, they share a commitment to developing innovative fabrics that keep athletes comfortable and stylish during and after their workouts.

“We’re always open to unlock opportunities to fuel our innovation pipeline,” Lululemon CEO Laurent Potdevin said in a statement. “In bringing together 7mesh’s extensive technical apparel expertise and performance-focused mindset with the capabilities of our industry disrupting R&D Whitespace team, we perfectly blend fashion and function to co-create transformational products for our guests.”

Like yoga, cycling is an athletic endeavor with a smaller consumer base than, say, running. But its popularity is growing, in part because of the growth of indoor cycling boutiques like Soul Cycle, which combines cycling with other fitness routines. The effort is just one branch of Lululemon's 10-year plan to find half of net profits from categories in which it’s not a big competitor, according to Fortune magazine.

As competition and trend saturation of the athleisure category continue to challenge Lululemon, the company must search for new avenues for innovation and sales. In fact, Lululemon CFO/COO Stuart Haselden told Fortune the door is open for a full takeover of 7mesh; for now, though, the companies are planning to bring developed cycling merchandise to Lululemon stores by the middle of 2018.

Lululemon’s redoubled commitment to production innovation (after manufacturing troubles that a few years ago had customers complaining about the expensive yoga pants and later about another style being too sheer) is paying off, both in terms of sales and price.

Last quarter the company said it’s had success with its new $98 Enlite sports bra, made of its new patented fabric Ultalu. “We’re really excited. It’s our most expensive bra in our portfolio,” Lululemon Vice President, Global Merchandising Sun Choe told analysts in early June, according to a transcript from Seeking Alpha. “We have seen zero price resistance. But what we’re finding is that if we have a technical solve and we’re differentiated in the market, she’s willing to pay the price.”