Peloton Falls Short As It Continues To Work on Rebranding and Expanding

Last Wednesday, Peloton Interactive Inc PTON posted a wider-than-expected loss and quarterly drop in subscribers greatly due to Bike recall that costed the fitness company more. Shares plunged 22% in response. CEO Barry McCarthy, who is also a former Netflix Inc NFLX and Spotify Technology S.A. SPOT executive, continues to focus on getting the company back on a path to growth as it previously warned in May the fourth quarter is expected to be among its most challenging growth-wise.

Fourth Fiscal Quarter Highlights

For the quarter ended on June 30th, sales were above expectations of $639.9 million despite having dropped to $642.1 million from last year’s comparable quarter when revenue amounted to $678.7 million. Peloton made a net loss $241.8 million, or 68 cents per share, which is wider than Refinitiv’s expectation of 38 cents. Peloton reported that subscribers fell by 29,000 compared to the previous quarter but rose 4% YoY in line with company expectations the quarter ended with 3.08 million subscribers.

Peloton believes that 15,000 to 20,000 people decided to pause their monthly subscriptions while waiting for the replacement of their seat post, therefore the Bike recall resulted in more churn than expected. Since it was announced in May, the recall impacted more than 2 million Bikes sold since January 2018, costing Peloton $40 million in the reported quarter, which is far more than anticipated.

Peloton blamed the wider-than-expected loss on the recall of its Bike recall as well as seasonality, considering that fiscal fourth quarter falls under the slower summer months when consumers tend to pull away from workouts for the sake of traveling.

Rebranding And Expanding

After being known as the Henry Ford of stationary bikes during the last decade, Peloton is now changing its strategy to show it is a fitness company for all, available anytime, anywhere and anyplace. Earlier in August, it launched a business-to-business Peloton Business offer to fuel revenue and attract new customers, with AB Volvo VLVLY and Dropbox Inc DBX already being among its clients. Last Tuesday, it also kicked off its school initiative, as it will create co-branded Peloton bikes with the University of Michigan that will be used across the school’s facilities. McCarthy announced more exciting new partnerships ahead as Peloton tries to return to growth by proving that it is more than a stationary bike company, focusing on its app as much as its on pricey connected fitness products.

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