Peloton stock plunged about 20% in Thursday morning trading.
Here’s how Peloton’s fiscal second-quarter results compare to Wall Street expectations, based on analyst research by LSEG (formerly Refinitiv).
- Loss per share: 54 cents vs. expected 53 cents
- Revenue: $743.6 million vs. $733.5 million expected
The company reported a net loss of $194.9 million, or 54 cents per share, for the three months ended Dec. 31, compared with a loss of $335.4 million, or 98 cents per share, in the year-ago period. was.
Sales decreased to $743.6 million from $792.7 million in the same period last year.
The company issued a dire outlook for the current quarter, and its full-year sales outlook was also weak.
Peloton expects fiscal third-quarter revenue to be between $700 million and $725 million, compared to Wall Street’s expectation of $754 million, according to LSEG. The company expects an adjusted EBITDA loss of $20 million to $30 million, compared to analysts’ expectations of a $2 million loss, according to Street accounts.
In a letter to shareholders, Treasurer Liz Coddington said: “Uncertainty surrounding our ability to effectively grow subscribers to our paid apps and the performance of our other new initiatives; “The macroeconomic outlook weakens our outlook.”
Peloton’s connected fitness subscription guidance exceeded expectations. The company also said demand for the Tread+ was “much stronger” than expected, with strong sales at retail partners such as Dick’s Sporting Goods and Amazon.
Peloton managed to turn a profit for the second straight quarter on its connected fitness products, which had long been a loss-making business. According to StreetAccount, Peloton’s connected fitness products had a gross margin of 4.3%, compared to Wall Street’s estimate of 3.4%.
Nearly two years after CEO Barry McCarthy took over, Peloton has shown some signs of progress, but it still falls short of his key goals.
In a letter to shareholders last February, Mr. McCarthy set a goal of returning the company to profitable growth within a year, but Peloton fell short of that goal. The company currently expects to reach that milestone at the end of this fiscal year in June.
Mr. McCarthy also set a goal of consistently positive adjusted EBITDA within a year, which he also failed to achieve. He now expects Peloton to generate positive free cash flow during its fiscal fourth quarter, which ends at the end of June.
Coddington said on a call with analysts that Peloton: The company expects sales of hardware products to continue to be weak in the coming quarters, hurting free cash flow. The company’s bike rental program also hurts free cash flow because it does not receive full payment for the product upfront.
But Peloton accomplished many of the other goals set by McCarthy, including expanding its corporate wellness and commercial partnerships, selling its manufacturing facility in Ohio, and realigning its retail footprint.
In a letter to shareholders, Mr. McCarthy outlined a series of initiatives he has spearheaded since taking office, explaining which have worked and which have not.
On the positive side, McCarthy said Peloton’s retail partnerships with companies like Dick’s Sporting Goods and Amazon are doing well.
“We saw very strong sales growth through these channels this holiday season, with 74% year-over-year unit sales growth in the second quarter,” McCarthy said. “The key takeaway we learned from these holiday results is that we can better optimize our sales and marketing strategies going forward, resulting in even more sales from these partners and better for Peloton. It brings margin mix.”
Peloton’s bike rental program is also doing well, the CEO said, and the company expects revenue to increase 100% year-over-year in fiscal 2024.
“Given the current churn and purchase rates for Bike and Bike+, the underlying economics remain attractive. ,” McCarthy said. “Bike rental is growing rapidly with attractive economics, and we are actively pursuing new opportunities to drive that growth.”
Demand for Tread+, which was recalled in 2021, was also strong, and sales of the entry-level tread also exceeded the company’s expectations.
“The overall treadmill market is approximately twice the size of the stationary bike market, so our newfound momentum in the treadmill category and diversification of hardware sales beyond Bike/Bike+ will help us if we can maintain this momentum. , which is good news for Peloton’s future growth,” McCarthy said.
But McCarthy said on a call with analysts that he doesn’t know what demand for tread will be in the coming quarters and whether the company will be able to meet it. Peloton has ‘limited’ experience selling products And even fewer have sold at full price without discounts or promotions, he said.
McCarthy said in a letter to shareholders that if the company hasn’t failed on some projects, “we are not testing new initiatives aggressively enough.”
Over the summer, Peloton announced a partnership with the University of Michigan that included selling co-branded bikes in the school’s colors, but sales to alumni and boosters fell far short of expectations. Peloton had planned to roll out similar initiatives with other universities, but now plans to end the program.
Peloton also fell short of improving customer service, another goal McCarthy set for the company last year.
“This past holiday season was particularly taxing for our members. The member support experience tarnished our brand, and we must do better,” McCarthy wrote. . “The team is currently in the midst of a reboot. New leadership, new systems, new third-party vendors, new training, new staff. I’m confident we’re on the right path this time. I’m confident in the new We are demonstrating leadership and am confident that in the coming months, our members will be able to receive the level of service they deserve and expect, and that they can be proud of. ”
Please read the full financial results release here.
Don’t miss the next story from CNBC PRO.