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Peloton hits a wall after soaring through pandemic
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PELOTON suffered its worst day as a publicly traded company earlier this month after telling investors it will likely lose more money than it had expected in fiscal 2022.
The exercise bike and treadmill company has thrived during the pandemic, recording its first and only profitable quarters.
It benefited from Americans, unable to hit the gym, instead setting up places to work out at home.
Sales of its high-end bikes and treadmills soared, as did subscriptions for its online, interactive classes.
Those sky-high sales have stalled, however, since the rollout of COVID-19 vaccines.
Gyms have reopened with some restrictions, and people are beginning to spend money on other things, like travel and restaurants.
In late October, the company said it expects those lucrative subscriptions to drop 6 percent and losses in 2022 of between US$425 million and US$475 million. That’s a lot more red ink than its previous guidance of US$325 million in losses.
Peloton has other problems. It’s wrestling with the same snarled global supply chains that have plagued manufacturers this year as economies reopen.
What’s more, gyms that had closed during the pandemic began offering their own virtual classes, further encroaching on one of the company’s greatest strengths.
It is also recovering from a recall of its treadmill machine, something it had fought, after it was linked to a child’s death and numerous injuries.
“Given the unprecedented circumstances presented by the global pandemic, we said last quarter that modeling the exit from COVID and the massive growth we saw in fiscal 2021 would be a challenging task, and that has certainly proven to be true,” Chief Executive Officer John Foley told investors on a conference call.
Peloton’s stock fell US$30.42, or 35 percent, to close last Friday at US$56.64.
It was the worst trading day for the company, just 10 months after its shares hit an all-time high above US$171.
Peloton’s early success also brought new competition from companies that offered cheaper bicycles and exercise equipment.
In August, the company cut the price of its Peloton Bike — its marquee technology — from US$1,895 to US$1,495.
Industry analysts were quick to temper expectations for the company last Friday, with one citing “rapid deterioration” in Peloton’s guidance for next year.
Scott Devitt of Stifel Financial said he had believed Peloton would continue to grow, but he has since recalibrated that opinion.
“Now, given the materially lower expectations, we expect it will take several quarters to determine a more normalized pace of growth, or more skeptically, whether or not the revised outlook is an indication that the core product may be closer to maturity in existing markets than previously thought,” Devitt wrote to clients.
Peloton reported sales of US$805 million for the first quarter of fiscal 2022, close to most Wall Street targets. But the company lowered its 2022 sales expectations to between US$4.4 billion and US$4.8 billion in 2022, well below the US$5.3 billion analysts had forecast.
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