Peloton Interactive Inc. Stationary bikes are on display in the company’s Madison Avenue showroom on Wednesday, December 18, 2019 in New York City, United States.
Jinah Moon | Bloomberg | Getty Images
Peloton said Thursday its fourth-quarter tax deficit widened as the pace of revenue growth slowed significantly and increased costs associated with the treadmill recall.
Peloton warned that its income would suffer in the near future as it reduced the price of its original bikes by about 20%. It begins to reorient its mix of activities towards the sales of treadmills, which are less profitable than its cycles. It is also facing rising commodity costs and freight prices, as it plans to increase its marketing spending in the coming months.
The company offered a disappointing first quarter revenue outlook.
Here’s how Peloton fared for the quarter ended June 30 compared to what Wall Street expected, using a survey of analysts from Refinitiv:
- Loss per share: $ 1.05 vs. 45 cents expected
- Revenue: $ 936.9 million vs. $ 927.2 million expected
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 ago. That’s more important than analysts polled by Refinitiv predict a loss of 45%.
Total revenue rose 54% to $ 936.9 million, from $ 607.1 million a year ago, against an estimate of $ 927.2 million. But growth slowed from the third quarter, when sales more than doubled from a year earlier and topped $ 1 billion.
In May, growth slowed when Peloton recalled its Tread and Tread + treadmill products and temporarily halted sales of the machines. Its cheaper tread goes on sale next week. The company has yet to reveal when it will start selling Trade +.
But the bike maker also faces stiff competition from other home fitness companies, such as Lululemon-owned Hydro, Tonal and Mirror. And as pandemic restrictions are lifted, more consumers are choosing to return to the gym or take group classes in person.
“The past year has been an inflection point for the connected fitness industry, with a significant increase in awareness and demand,” CEO John Foley said in a letter to shareholders.
Peloton’s connected fitness segment revenue, which includes contributions from the company’s acquisition of Precor, increased 35% year-on-year to $ 655.3 million, or 70% of total revenue. Membership revenues increased 132% to $ 281.6 million.
the unsubscribe rate lasts
Peloton ended the quarter with 2.33 million connected fitness customers, up 114% from last year. Connected Fitness subscribers are people who own a Peloton product and also pay a monthly fee to access the company’s digital workout content.
Digital subscriptions – which do not require equipment – increased 176% to more than 874,000, thanks to free trials, the company said.
Connected Fitness’s average monthly net churn rate, which Peloton uses to measure Connected Fitness customer retention, reached 0.73% from 0.52% a year ago. The Peloton’s churn rate hit its lowest level in six years at 0.31% in the last quarter. The lower the churn rate, the less business Peloton does with its user base.
Meanwhile, the average monthly workout per Connected Fitness subscriber fell to 19.9 from 24.7 a year ago. The company said the reduction was expected due to seasonal trends – fewer people sweating indoors during the summer months – and more people leaving their homes amid the health crisis.
The outlook for the first quarter is disappointing
In its first fiscal quarter, Peloton forecast revenue of $ 800 million, less than the $ 1.01 billion sought by analysts.
Peloton said the outlook took into account the reduction in the price of bicycles and a “modest” contribution to trade revenues.
It plans to have 2.47 million connected fitness subscriptions by the end of the quarter, with an average monthly churn rate of around 0.85%.
For the year, Peloton saw sales reach $ 5.4 billion and connected fitness customers to 3.63 million. That’s ahead of the consensus estimate of $ 5.27 billion.
Find the full press release of Peloton’s results here.
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