Peloton Interactive Inc. experienced a significant drop in its shares, falling approximately 23% to an 18-month low on Thursday, February 5th. This decline followed the company's forecast for third-quarter revenue to be between $605 million and $625 million, which is below analysts' average estimate of $638.4 million. For the second quarter, Peloton reported revenue of $656.5 million, missing analyst expectations of $674.3 million. The company also announced a wider-than-expected second-quarter loss of 9 cents per share, compared to an anticipated 6-cent loss.
The weaker-than-expected performance is attributed to soft demand for its fitness equipment, particularly lower-than-expected Connected Fitness Product sales to existing members. New CEO Peter Stern noted that a refresh of the entire hardware lineup, including new Bike, Bike Plus, Tread, Tread Plus, and Row Plus models with features like swivel screens and AI-powered feedback, has not resonated as strongly as anticipated with existing users, leading to weaker holiday sales in what is typically a strong quarter. Despite these new offerings, the company observed a longer upgrade cycle than expected among its installed base.
Further contributing to the challenges, Peloton's membership on its subscription-based fitness platform decreased by over 6% year-over-year to 5.8 million in the second quarter. The company has been implementing cost-cutting measures, including an 11% workforce reduction in January, and has raised prices for both equipment and subscriptions. CFO Liz Coddington is also set to depart in March, though a delay in revenue recognition of about $4 million due to longer delivery times also impacted the second quarter's reported figures. Consumer confidence in the U.S. remains low, impacting spending on higher-priced items.
