Lululemon is laying off 120 staff from its Studio division, The Logic has learned, as it moves to stop selling its Mirror connected-fitness device and instead partner with Peloton on digital fitness content.

It’s the second set of layoffs to hit the division in recent months as Lululemon has weighed what to do with Mirror, which the Vancouver-based athleisure company has struggled to turn into a success since acquiring it for US$500 million in June 2020, amid the pandemic-fuelled connected-fitness craze. Lululemon Studio previously laid off 100 people in July.

Staff learned about the layoffs Wednesday in a virtual town hall, a source told the Logic, as it made public its decision to stop selling the $1,000 Mirror device by the end of the year. Individual staff were told after the meeting whether their jobs were among those being cut, said the source, whom The Logic agreed not to name so they could speak freely about internal company matters, and the layoffs were not effective immediately.

“Staff were surprised and disheartened” the company made further cuts after the July round, the source said. Many had assumed their jobs were now safe.

Lululemon confirmed the layoffs in an emailed statement, but did not answer The Logic’s questions. 

“As we considered the Peloton partnership, the most difficult decision was the direct impact the evolution will have on approximately 120 of our people who support Lululemon Studio today,” said spokesperson Erin Hankinson in an email. The company appreciates their contributions, she said.

Under the terms of a new five-year partnership announced Wednesday, Peloton will soon begin making all of Lululemon’s digital fitness content. Starting in November, members who pay a monthly fee to stream classes on their Mirror will receive access to Peloton’s digital catalog. 

Mirror, Lululemon’s first-ever acquisition, let users participate in virtual exercise classes using its smart-mirror device. Lululemon initially touted the purchase as “an important step in our strategy,” one that would drive revenue and become profitable in its own right. The company quickly had to scale back its expectations, however, offering steep discounts on Mirror devices and downgrading expected sales by more than US$100 million. Lululemon has since reported a US$442.7-million impairment charge related to the acquisition.

Mirror’s founding CEO, Brynn Putnam, left Lululemon sooner than expected after the acquisition, and the company hired Michael Aragon, an executive from the game-streaming platform Twitch, to lead the division. He soon unveiled a new direction for Mirror—one that would let Lululemon’s fitness content be streamed on any device through a two-tiered membership program, Lululemon Studio, rendering the Mirror smart device inessential.

While Lululemon said it will continue to service and support Mirror devices, customers who signed up for Luluemon’s fitness content via its app will have to switch to Peloton’s app.

Meanwhile, Peloton will sell Lululemon co-branded gear at its stores and online. The clothing partnership comes after the two companies settled a patent-infringement lawsuit in which Lululemon alleged Peloton was copying its designs with the latter’s clothing line for women.

Peloton’s shares jumped on the news, rising more than 12 per cent to a high of US$5.23 in early morning trading on the Nasdaq. Lululemon’s shares were relatively unchanged.