Brody Longo trains on his Peloton stationary bike on April 16, 2021 in Brick, New Jersey.
Michael Loccisano | Getty Images
Peloton posted a bigger-than-expected loss in the fiscal first quarter as a sharp decline in connected fitness product revenue outweighed a surge in subscription sales.
Shares fell more than 17% in premarket trading on Thursday. As of Wednesday’s close, Peloton stock is down about 75% so far this year.
Here’s how the fitness equipment maker compared to Wall Street estimates, according to Refinitiv.
- Loss per share: $1.20 vs. 64 cents, expected
- Revenue: $616.5 million versus $650.1 million expected.
Sales fell 23% compared to the same period last year. Peloton’s revenue guidance for the holiday quarter, between $700 million and $725 million, would indicate quarter-over-quarter growth, but is well below analyst estimates of $874 million.
“Given the macroeconomic uncertainties, we believe near-term demand for connected fitness hardware is likely to remain challenged,” the company said.
Peloton CEO Barry McCarthy said in an earnings call Thursday that the company’s turnaround is “in the works.” The company struggled with the end of pandemic-era demand as lockdowns spurred home-workout growth. This year, under McCarthy, the company has undergone significant leadership changes, mass layoffs and a new business strategy. The company has evolved beyond its direct-to-consumer roots to doing business with other retailers and to a model that emphasizes subscriptions.
“The ship is turning,” McCarthy, a former Spotify and Netflix exec, said Thursday.
Co-founder and former CEO John Foley left his position as chairman of the board in September along with co-founder and chief legal officer Hisao Kushi, followed shortly by Peloton’s head of marketing, Dara Treseder. Foley stepped down from his role as CEO in February when he was succeeded by McCarthy.
McCarthy has led a comprehensive turnaround effort for the company. He oversaw thousands of layoffs, including 500 jobs that were weeded out in early October. The cost-cutting efforts have been paired with new initiatives to sell more bikes and grow Peloton’s digital subscriber base.
Subscription revenue increased to $412.3 million from $304.1 million last year. Meanwhile, connected fitness products revenue fell to $204.2 million from $501 million. Peloton’s gross margin was broadly in line with expectations at 35.2%, improving dramatically from a negative 4.4% in the previous quarter.
Peloton reported a total of 6.7 million members, up from 6.3 million last year but down from 6.9 million in the previous quarter. McCarthy has said the company hopes to one day reach 100 million members.
The company also announced an improvement in its free cash flow, which was a negative $246.3 million compared to a negative $411.9 million in the previous quarter and a negative $651.9 million in the year-ago period. Peloton hopes to be close to breakeven in the second half of the fiscal year.
McCarthy’s recent initiatives included Peloton’s decision to sell bikes and treads through Amazon and Dick’s Sporting Goods. The company also began certifying used bikes and expanded its bike rental program nationwide. And in a partnership with Hilton, the company will put bikes in the fitness centers of about 5,400 hotels across the country.
Peloton’s $3,195 rowing machine was also introduced in the first quarter. The company recently extended its refund period for its recalled Tread+ treadmill, which was recalled due to multiple user injuries and one death.
The company reported $199 million in accrued recalls, restructuring and impairment charges in the first quarter as it continues to advance its turnaround.