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Peloton shares drop 25% after posting wider than expected loss, falling sales

The exterior of a Peloton store is seen on February 05, 2022 in Dusseldorf, Germany. 

Jeremy Moeller | Getty Images

Peloton on Wednesday reported a wider than expected loss and a quarterly drop in new subscribers that it blamed on its recall of its Bike seat post and seasonality, sending shares plunging about 25% in premarket trading.

The company fell short of analysts’ earnings estimates but beat sales expectations.

Here’s how the fitness company did in its fourth fiscal quarter compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:

  • Loss per share: 68 cents vs. 38 cents expected
  • Revenue: $642.1 million vs. $639.9 million expected

The company reported a net loss of $241.8 million, or 68 cents per share, for the three-month period that ended June 30, compared with a loss of $1.26 billion, or $3.72 a share, a year earlier. 

Sales dropped to $642.1 million, down $678.7 million a year earlier.

The company’s fiscal fourth quarter, which falls during the summer months, is traditionally slow not just for Peloton but also for other fitness retailers. Consumers have a tendency to pull back on workouts during the season as they travel and take part in other summer plans. 

In May, CEO Barry McCarthy warned the fourth quarter would be among its most challenging from a growth perspective. For the first time, Peloton projected a decline in subscribers.

It ended the quarter with 3.08 million subscribers, up 4% year over year and in line with the company’s expectations. But compared to last quarter, subscribers declined by 29,000. The company attributed the drop to a “seasonal” slowdown in hardware sales and higher than anticipated churn.

“Peloton’s FYQ4 performance is a reminder we operate a seasonal business,” McCarthy wrote in a letter to shareholders.

“The slowdown exceeded our expectations through May and through the first three weeks of June as consumer spending shifted toward travel and experiences,” he wrote. “Then eight weeks ago the trend reversed itself, and we began to see a reacceleration in hardware sales.”

The former Netflix and Spotify executive has spent the last three months focusing on new strategies aimed at getting the fitness company back on a path to growth.

In May, it announced a major rebrand under the guidance of its new chief marketing officer Leslie Berland that positioned Peloton as a fitness company for all that is just as invested in its app as it is its pricey connected fitness products, such as its Bike, Tread and Row. 

It unveiled a series of new pricing tiers for its fitness app that includes an unlimited free membership option (with no credit card required) and levels that cost $12.99 and $24 monthly. The app allows consumers to watch Peloton’s fitness classes and build their own workouts from wherever they are, including their home gym. 

Peloton has also been leaning into its business-to-business strategy to further drive revenue and capture new customers. Earlier this month, it announced the launch of Peloton for Business, which allows companies to offer access to the app and its connected fitness products through its benefits offerings. 

Clients include Volvo, which has Peloton bikes in its company fitness center and offers employees access to the Peloton app, its all access membership and discounts on hardware, including the Bike, Bike+, Tread and Guide. Dropbox offers a similar package to its employees. 

Peloton also launched a new program aimed at partnering with colleges and universities. The new strategy kicked off Tuesday with its announcement that it will be partnering with the University of Michigan to create co-branded Peloton bikes that will be used at the school’s various fitness facilities – and along the sidelines at the school’s football stadium, known as the Big House. 

It also launched a new discounted offering for college students of its “One” tier, which typically costs $12.99 a month but will be cut to $6.99 a month.

Read the full earnings release here.


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