Peloton has suffered a blow to its share price this week, after announcing to investors that it is still months away from returning to growth.
In a letter to shareholders from CEO Barry McCarthy published Thursday, The US company known for its connected indoor exercise bikes and treadmills revealed a net loss of $194.9 million for the three-month period ending December 31.
Meanwhile, revenues fell to $743.6 million, a 6% drop versus $792.7 million the previous year.
Like much of the home fitness industry, Peloton enjoyed rapid growth at the hands of the COVID-19 pandemic. The closure of gyms and the restriction of group activities around the world created a surge in demand for at-home exercise equipment, and Peloton's share price, abbreviated to PTON, rocketed from an average of around $25 per share to a peak of $162.72.
The share price remained elevated, hovering between $80 and $120 per share until November 2021, when the company was forced to revise its full-year fiscal 2022 guidance downwards. Within a week, the share price dropped by around 50%, and it has been on a downward trajectory since.
Since October 2023, PTON has hovered between $4.50 and $7.00 per share, and today's price is $4.24, rebounding slightly from an all-time low of $4.12 last Friday.
The latest drop comes partly due to the disappointing results, but primarily because of the cautious outlook ahead of Q3 and the remainder of the year, in which the company's forecast fell short of Wall Street's expectations.
Peloton expects its Q3 revenue to be between $700 million and $725 million, with an adjusted EBITDA (earnings before interest, depreciation, tax and amortization) loss of $20 million. This is significantly worse than the $2 million analysts estimated, according to CNBC and StreetAccount.
Despite the soft outlook, McCarthy voiced optimism that things are moving in the right direction for the brand.
He said the company had seen "exceptionally strong sales growth" through third-party retail sales such as Dick's Sporting Goods and Amazon, claiming a 74% year-on-year uptick in Q2, which covers the holiday period from October to December.
He also says the company is forecasting 100% year-on-year growth for its Bike Rental program, which sees users able to rent the full package of equipment for $89 a month, foregoing the high upfront cost of buying the Bike or Bike+.
There was also positive news coming out of the company's foray into running, the Tread+ treadmill, with McCarthy saying "demand has been significantly stronger than we expected."
The company boasts 3 million Connected Fitness subscriptions and a further 718,000 Peloton App subscribers. It claims that users were "faster than anticipated" to reactivate subscriptions which were paused during the seatpost recall issue, which affected 2.2 million users in May last year.
Despite the optimism, McCarthy also called out some failures, although not before first reassuring investors that "if we're not failing, we're not being aggressive enough testing new initiatives."
"One initiative that hasn’t worked is our premium co-branded Bike experiment with the University of Michigan," he explained. This was a collaboration that saw the brand create Bike models in school colours, made available for purchase.
"We sold substantially fewer Bikes to alumni and boosters than we expected. What seemed like a good idea didn’t deliver. So instead of launching additional co-branded bikes in school colors, we will end-of-life this hardware initiative."
McCarthy also called out the customer service department as another failure.
"The Member Support experience has tarnished our brand, and we simply must do better. The team is currently in the middle of a reboot. New leadership. New systems. New third-party vendors. New training. New staff.
"I’m confident we’re on the right path this time. I’m confident in the new leadership, and I’m confident that in the next few months, our members will be receiving the level of service they deserve and expect and that we can be proud of."
