Peloton Reports a $1.2 Billion Loss as Sales Slow

Peloton, the exercise bike company that saw huge success in the early days of the pandemic only to flounder as sales slowed, reported a $1.2 billion quarterly loss on Thursday as it struggled to sell excess inventory.

Revenue in the fourth quarter fell 28 percent, to $679 million, from the same period a year earlier, Peloton said in a report. The loss in the quarter, which included $415 million in restructuring charges, was much wider than the $313 million loss in the same quarter last year. The company has lost money for six straight quarters.

“Naysayers” about the company’s strategy “see a melting pot of declining revenue, negative gross margin and deeper operating losses,” the company’s chief executive, Barry McCarthy, said in a letter to shareholders. But he added that he saw “significant progress driving our comeback and Peloton’s long-term resilience.”

Peloton continued to burn through cash, reporting a negative cash flow of $412 million in the quarter, only somewhat better than negative $678 million the year before. “We are on a journey to reach sustained positive free cash flow,” Mr. McCarthy wrote, adding that the company hoped to reach that point in the second half of its 2023 fiscal year.

On a call with analysts on Thursday, Mr. McCarthy said the company planned to focus on value-minded customers. Asked about key areas for the business, he said the certified pre-owned program was a top priority, followed by digital app growth and rentals.

He added that Peloton’s digital content, such as its classes, scenic rides and a fitness-meets-gaming option, remained important. “It’s the crown jewel,” he said, “and it continued to perform spectacularly well.”

The company ended the quarter with 2.97 million subscriptions, up 27 percent from the year before. (This was, however, roughly flat from the previous quarter.) It has $1.25 billion in cash and a $500 million line of credit.

Peloton did not offer an outlook for its next 2023 fiscal year, but projected revenue for the current quarter to be $625 million to $650 million, down 21 percent from $805 million a year earlier.

Peloton’s shares plunged more than 18 percent in trading on Thursday.

Once heralded as a pandemic darling, Peloton has faced challenges as gyms have reopened and demand for its products has waned.

On Thursday, the company announced a deal to sell exercise equipment, accessories and apparel on Amazon’s U.S. website. Equipment sold on Amazon must come with the option for self-installation, which precludes the sale of Tread and Bike+ products. “I’d love to sell all of our connected fitness platforms on Amazon,” Mr. McCarthy said on the call with analysts.

As part of Mr. McCarthy’s turnaround strategy, Peloton said this month that it was taking drastic measures to cut costs, including laying off nearly 800 workers, eliminating warehouses and closing retail locations across North America.

The company also said it would be raising prices on some of its fitness products, increasing the cost of its Bike+ model by $500 and its Tread model by $800. Last month, the company announced that it would stop making its own bikes and instead outsource all production to an overseas company.

In February, Mr. McCarthy took over as chief executive for John Foley, a co-founder of the company. That month, the company laid off 20 percent of its work force, some 2,800 workers. Peloton’s chief financial officer said at the time that the company wanted to save at least $800 million annually.

Peloton has also tried to address problems with public perception of its fitness equipment.

In May 2021, after initially saying its treadmills were safe, Peloton recalled its Tread+ and Tread machines after injuries and the death of a child were linked to the products.

In October 2020, after reports of more than 100 pedals breaking and 16 injuries, Peloton recalled clip-in pedals on about 27,000 bikes sold from July 2013 to May 2016.

And negative television portrayals of Peloton products, including on the “Sex and the City” reboot “And Just Like That” and “Billions,” caused its stock price to dip. Peloton’s stock has lost about two-thirds of its value this year.


Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button