Peloton shares soared thanks to a partnership with Lululemon

Jane Van Santford rides her Peloton exercise bike at her home in San Anselmo, California.

Ezra Shaw | Getty Images

Peloton and Lululemon are joining forces.

The two companies announced a five-year partnership on Wednesday that will bring Peloton content to the Lululemon workout app. Lululemon, in turn, will become Peloton’s primary activewear partner, and a select number of Peloton trainers will become ambassadors for the apparel retailer.

The terms of the deal and whether the two companies will share revenues were not disclosed.

Peloton stock jumped more than 15% in extended trading on the news. Shares of Lululemon — which has a market cap of about $48 billion compared to Peloton’s $1.7 billion — were flat in after-hours trading.

As part of the announcement, Lululemon said it plans to stop selling the Mirror app, which allows users to stream workout classes, by the end of the year.

The company said earlier this year that the company was exploring selling the product after sales fell short of expectations and Lululemon was forced to take a $443 million impairment charge related to the equipment.

It will now be possible to access Peloton content through Mirror, but the fate of the Mirror device and whether the division will be sold remains unclear, she told CNBC.

Meanwhile, sales of Peloton’s connected fitness products have steadily declined from pandemic-era highs, so the company has focused on content as its core value proposition.

Its partnership with Lululemon will be the first time Peloton has shared this valuable content with another company, along with a smaller partnership with Delta Air Lines that offers meditation and movement classes to travelers.

Lululemon has about 13 million members, nearly double Peloton’s global membership total of about 7 million. Under the agreement with Lululemon, Peloton will not be able to reach members who consume its content.

This news comes one day after Peloton announced that co-founder and chief product officer Tom Cortese is leaving the company.

In May, CNBC spoke with Cortez and Peloton’s chief content officer, Jane Kotter, about the company’s rebranding strategy and whether it has any plans to partner with other companies to offer its content.

Cotter, the mastermind behind Peloton’s content machine, said “nothing is ever off the table” but said “there’s no real need” for such a partnership.

For his part, Cortez explained that partnerships are not on the horizon, at least in the short term.

“That won’t happen,” Cortez replied.

“One thing that has worked very well for Peloton in the past and will continue to work very well moving forward for Peloton is our direct relationship with our members. We will not lose our direct relationship with our members,” he continued. “It’s part of how we build community and how we build our business. There’s no reason to have a middleman between us and our members.”

Cortez could not immediately be reached for comment following news of the partnership.