Peloton’s uphill struggle to generate sales as more people break away from health routines imposed during the pandemic continued into the third quarter and the company’s earnings outlook sent shares down more than 20% before the opening bell.
The maker of high-end exercise bikes and treadmills has thrived during the COVID-19 outbreaks and the New York-based company’s sales growth doubled in 2020 and jumped 120% in its last fiscal year .
The availability of vaccines and the easing of COVID-19 restrictions opened up more training options, however, and Peloton suffered. In February, the company announced a major restructuring and abandoned plans to open its first American factory, which would have employed 2,000 workers in Ohio. Co-founder John Foley stepped down as CEO and the company said it would cut nearly 3,000 jobs.
On Tuesday, the company announced a binding commitment letter with JP Morgan and Goldman Sachs to borrow $750 million, but new CEO Barry McCarthy said in a letter to shareholders that Peloton ended the quarter with $879 million in debt. cash,” which leaves us barely capitalized for a business of our scale.
Peloton quickly ramped up during the pandemic, growing its subscriber base from 700,000 to 3 million. This caused him to overestimate product demand and burdened the company with a substantial inventory of unsold bicycles and treadmills.
McCarthy said the company is rethinking its capital structure as it pushes to expand its subscriber base to 100 million.
“Turnarounds are hard work,” McCarthy said in a letter to shareholders. “It’s intellectually difficult, emotionally exhausting, physically exhausting and all-consuming. It is a full contact sport.
Peloton Interactive Inc. lost $757.1 million, or $2.27 per share, for the three months ended March 31. Excluding one-time items, it lost 98 cents per share, beating projections for a loss of 85 cents per share, according to a Zacks Investment Research survey.
The loss was far bigger than last year when Peloton was $8.6 million in the red.
Revenue fell 15% to $964.3 million, which was also below analysts’ projections.
Peloton said it expects revenue this quarter to be between $675 million and $700 million. It also soured investors early in the session. Industry analysts had forecast fourth-quarter revenue of $820.3 million, according to FactSet.
Shares fell $3 to $11.13 about an hour before markets opened. Shares have already fallen more than 60% this year. At their peak, shares of Peloton cost as much as $171.