Peloton stationary bike for sale at the company’s showroom in Deadham, Massachusetts, USA, on Wednesday, February 3, 2021.
Adam Glanzman | Bloomberg | Getty Images
Peloton on Tuesday reported wider-than-expected quarterly losses and a sharp drop in sales as stocks accumulated in warehouses and ate up the company’s cash.
The manufacturer of connected fitness equipment also offered weak sales forecasts for the fourth quarter, citing milder demand. The company believes that the planned increase in subscription prices may lead to some users canceling their monthly membership.
Peloton’s excess inventories have forced the company to rethink its capital structure, CEO Barry McCarthy said in a letter to shareholders. Peloton ended the quarter with a “thin capitalization” of $ 879 million in unlimited cash and cash equivalents, he said.
According to the CEO, to address this issue, the company earlier this week signed a letter with JP Morgan and Goldman Sachs pledging $ 750 million in 5-year debt. Two banks led Peloton’s IPO in 2019.
McCarthy said he is focused on stabilizing Peloton’s cash flows, getting the right people for the right roles and re-developing the business. Expanding subscription revenue is a central element of McCarthy’s strategy that he takes from his previous experience at Spotify and Netflix. He also said Peloton would soon be selling its products through third-party retailers, which the company had not done before.
Here’s how Peloton did over the three-month period, which ended March 31, compared to what Wall Street expected, based on a survey of Refinitiv analysts:
- Loss per share: $ 2.27 versus the expected 83 cents
- Income: $ 964.3 million versus the expected $ 972.9 million
Peloton’s losses increased quarterly to $ 757.1 million, or $ 2.27 per share, from a net loss of $ 8.6 million, or 3 cents per share, a year earlier. That was more than the 83-cent loss on the stock that analysts were looking for.
Revenue fell to $ 964.3 million from $ 1.26 billion a year earlier. This did not live up to expectations of $ 972.9 million.
The company said the decline over the same period last year was primarily due to a sharp decline in consumer demand after the peak of the Covid-19 pandemic. This was partially offset by growth in treadmill sales, the report said.
But Peloton also noted that it faced higher-than-expected profitability of its Tread + car, which was recalled in May last year, at about $ 18 million and affected the company’s quarterly results.
Over the past period, Peloton has received $ 594 million in sales from its connected fitness products and $ 370 million from subscriptions.
The company ended the quarter with 2.96 million connected fitness subscribers, an amount of 195,000 added.
In the fourth quarter, Peloton required revenue of $ 675 to $ 700 million. Refinitiv estimates analysts were looking for $ 821.7 million.
The company expects the number of connected fitness subscribers to be 2.98 million, which will be only 1% more than in the previous quarter.
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