Peloton, the popular fitness company, experienced a significant drop in its shares, declining over 20% on Thursday. The company announced that it expects to report another loss in the current quarter and has revised its full-year revenue forecast, indicating ongoing challenges in its turnaround efforts.
In a letter to investors, CEO Barry McCarthy acknowledged that some of the company’s initiatives, such as selling Peloton bikes with college colors, have failed to meet expectations. The program, which targeted alumni and boosters, resulted in substantially fewer bike sales than anticipated and will be discontinued.
McCarthy also expressed dissatisfaction with Peloton’s customer service department, Member Support, stating that it has tarnished the brand. He acknowledged that the busy holiday shipping season had put a strain on customer service and assured investors that the team is working on improving the situation in the coming months.
As a result of these setbacks, Peloton adjusted its full-year revenue forecast from the previous estimate of $2.7 billion to a range between $2.68 billion and $2.75 billion. The company reported a net loss for the third quarter of 2023, and its revenue for the second quarter decreased by 6% to $743 million compared to the previous year. However, this still exceeded analysts’ estimates.
Peloton revamped its digital app last year, introducing new pricing tiers and a refreshed look to attract customers who did not own its expensive equipment. However, the company’s finance chief expressed concerns about the uncertain growth of paid app subscribers and the performance of other new initiatives, as well as the overall macroeconomic outlook.
The company anticipates a 13% decline in paid app memberships for the current quarter. Despite these challenges, Peloton highlighted some positive developments, including strong sales growth through third-party retailers like Dick’s Sporting Goods and Amazon. Additionally, its partnership with Lululemon exceeded expectations, and the collaboration with TikTok to create fitness videos has generated excitement for the Peloton brand.
Peloton has made some progress in its turnaround plan, but the fitness company is expecting more dark days ahead after failing to reach a number of goals. https://t.co/gHQD8YFfgJ
— CNBC International (@CNBCi) February 1, 2024
Peloton has faced financial struggles, layoffs, and recalls in recent years. Its stock has also experienced a significant decline since 2020 when it benefited from the surge in demand during the Covid-19 pandemic. In January 2023, the company agreed to pay a $19 million penalty following a recall of 125,000 unsafe Peloton treadmills, which was one of the largest civil penalties in the history of the Consumer Product Safety Commission.
Last May, Peloton embarked on a “new chapter” by rebranding itself as a more inclusive fitness company, offering a wider range of options, more free classes, and tiered memberships, with a reduced emphasis on biking.
Barry McCarthy has served as Peloton’s CEO for two years, taking on the role in the same month two years ago.
In conclusion, Peloton’s shares took a significant hit as the company faced another loss in the current quarter and revised its revenue forecast. CEO Barry McCarthy acknowledged failed initiatives and expressed concerns about customer service. Despite challenges, Peloton highlighted positive sales growth through third-party retailers and successful partnerships. The company continues to navigate financial struggles and recalls while striving for a more inclusive brand identity.