Peloton's quarterly loss tops $1.2B as bike, treadmill sales plunge
Big decline in earnings estimates dissected
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Peloton Interactive Inc. posted losses of more than $1.2 billion in the most recent quarter as revenue plunged, and the maker of bikes and treadmills warned it would spend more cash than it brings in for several more months.
Chief Executive Barry McCarthy, who took over in February, said the company is taking steps to shore up finances, from sweeping layoffs to outsourcing manufacturing of its fitness equipment. Peloton lost $2.8 billion in the year ended June 30, compared with a $189 million loss in the prior year.
"The naysayers will look at our [fourth quarter] financial performance and see a melting pot of declining revenue, negative gross margin, and deeper operating losses. They will say these threaten the viability of the business," Mr. McCarthy said in a letter to shareholders. "But what I see is significant progress driving our comeback and Peloton's long-term resilience."
Demand for Peloton's bikes and treadmills has dropped, and the company's subscriber count, which grew fourfold during the height of the Covid-19 pandemic, rose by just 4,000 in the quarter ended June 30. Peloton predicts that number will remain flat in the current quarter.
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Revenue for the fourth quarter fell to $679 million, nearly a 30% drop from a year ago as declining exercise-equipment sales more than offset higher revenue from subscriptions.
The company's restructuring and operations burned through another $412 million in cash in the June quarter, after going through $650 million in each of the prior two periods. It ended June with $1.25 billion in cash reserves and a $500 million credit line.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| PTON | PELOTON INTERACTIVE INC. | 13.48 | +2.28 | +20.36% |
One of the pandemic's biggest winners, Peloton has struggled to adapt as Americans revert to prepandemic habits and tighten spending amid inflation near its highest level in decades.
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Mr. McCarthy's predecessor, Peloton co-founder John Foley, spent hundreds of millions of dollars to expand Peloton's manufacturing and supply, betting that demand would hold as the pandemic waned. Along with replacing Mr. Foley, the company earlier this year made changes to its board and said it would cancel plans for a $400 million factory in Ohio.
For the first time, in the most recent quarter, Peloton's subscription revenues were greater than equipment sales. Mr. McCarthy, who previously worked at Spotify Technology SA and Netflix Inc., aims to make Peloton primarily a subscription-based company. Subscriber revenue for the quarter was $383 million; equipment sales were $296 million.
Peloton Interactive Inc. plans to replace its chief executive, cut costs and overhaul its board after a slowdown in demand caused the once-hot bike makerโs value to plummet. (Peloton) It is a stark shift from the start of 2021, when Peloton's quarterly revenue peaked at $1.2 billion and exercise equipment comprised more than 80% of sales. The company said it expects total revenue of between $625 million and $650 million for the current quarter, which ends Sept. 30. Peloton on Wednesday said it would start selling its equipment and apparel on Amazon.com Inc.'s website, an announcement that led to shares jumping 20%. Through Wednesday's close, the company's share price is down 88% from a year ago. Earlier this month, the company said it would cut around 800 jobs in an effort to reduce costs. CLICK HERE TO READ MORE ON FOX BUSINESS Mr. McCarthy, in his investor letter, likened Peloton to a dangerously tipping cargo ship he was aboard as a high-schooler. The crew managed a dramatic recovery. "Peloton is like that cargo ship," he said. "We've sounded the alarm for general quarters. Everyone's at their station." Source: Read Full Article