Peloton Interactive Inc. stationary bicycles are on display on Wednesday, December 18, 2019 in the company’s showroom on New York’s Madison Avenue (USA).
Jeenah Moon | Bloomberg | Getty Images
Peloton said Thursday that its fourth-quarter tax loss widened as revenue growth slowed sharply and the costs associated with tape recovery increased.
Shares fell about 11% in expanded news trading.
Peloton warned that his profits will be affected in the short term because he reduces the price of his original bike by about 20%. It is also beginning to shift its business mix toward treadmill sales, which are less profitable than those in its cycles.
In addition, the company faces higher raw material costs and transportation prices, while it plans to increase marketing spending in the coming months.
Peloton offered a disappointing first-quarter revenue outlook.
This is how Peloton did during the quarter ended June 30 compared to what Wall Street expected, through a survey by Refinitiv analysts:
- Loss per share: $ 1.05 vs. 45 cents planned
- Revenue: $ 936.9 million vs. $ 927.2 million projected
Peloton posted a net loss of $ 313.2 million, or $ 1.05 per share, compared to net income of $ 89.1 million or 27 cents per share, a year earlier. This exceeded the 45-cent loss predicted by analysts surveyed by Refinitiv.
Total revenue grew 54%, to $ 936.9 million, from $ 607.1 million a year earlier, exceeding estimates of $ 927.2 million. But the pace of growth slowed since the third quarter, when sales more than doubled from the previous year and topped $ 1 billion.
Growth slowed, in part, because Peloton recalled both its Tread and Tread + treadmill products in May, and temporarily halted sales of the machines. Its less expensive tread will go on sale next week. The company has not yet said when it will resume sales of the Tread +.
But the cycle maker also faces tougher competition from other home fitness companies, such as Hydrow, Tonal and Lululemon Mirror. And as pandemic restrictions are removed, more consumers choose to return to the gym or take group face-to-face classes.
“Last year represented a turning point for the connected fitness industry, with a significant increase in awareness and demand following the onset of the Covid-19 pandemic,” wrote CEO John Foley in a letter to shareholders.
Revenue from Peloton’s connected fitness segment, which includes contributions from the company’s acquisition of Precor, rose 35% year-over-year to $ 655.3 million, representing 70% of total revenue . Subscription revenue increased 132% to $ 281.6 million.
The pace of change is high
Peloton ended the quarter with 2.33 million connected fitness subscribers, 114% more than the previous year. Connected fitness subscribers are people who own a Peloton product and also pay a monthly fee for access to the company’s digital training content.
Digital subscriptions (which do not require equipment) rose 176 percent to more than 874,000, driven by free trials, the company said.
The average monthly net of connected fitness, which Peloton uses to measure the retention of connected fitness subscribers, rose to 0.73% from 0.52% the previous year. Peloton’s exchange rate had hit a six-year low of 0.31% in the previous quarter. The lower the dropout rate, the less billing Peloton is seeing with its user base.
Meanwhile, the average monthly workout per connected fitness subscriber fell to 19.9, from 24.7 a year earlier. The company said the decline was expected due to seasonal trends, such as more people vacationing during the summer months or spending more time outdoors.
The outlook for the first quarter is disappointing
Pelotonsaid predicts, for its first fiscal quarter, that sales will reach $ 800 million, reflecting a reduction in the price of the bicycle and a “modest” contribution from tread revenue.
The forecast is well below the $ 1.01 million analysts estimated. However, analysts were unaware that the company would reduce the price of its bike by about 20%.
The company expects to have 2.47 million connected fitness subscriptions at the end of the quarter, with an average monthly deviation rate of approximately 0.85%.
For the year, Peloton sees sales have reached $ 5.4 billion and connected fitness subscribers are growing to $ 3.63 million. This is ahead of the consensus estimates of $ 5.272 billion.
Here you will find the full press release on Peloton’s earnings.
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