Peloton shares tumble as subscriptions decline due to bike recall, warm weather
Peloton said up to 20K subscribers paused their subscription while they wait for a bike seat post replacement
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High-end fitness brand Peloton faced a larger-than-expected loss in its fourth quarter as seasonal trends and a recall led to a decline in new subscriptions.
Peloton CEO Barry McCarthy said in a letter to shareholders Wednesday that the company experienced a decline of 29,000 subscribers compared to the prior quarter "due to the seasonal slowdown in hardware sales" as well as "higher than anticipated subscription churn," which is the rate at which the company lost its subscribers. It ended the quarter with 3.08 million subscribers.
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"The slowdown exceeded our expectations through May and through the first three weeks of June as consumer spending shifted toward travel and experiences," McCarthy said. He noted that trends started to reverse eight weeks ago when there was a re-acceleration in equipment sales.
Total revenue in the company's fiscal fourth quarter dropped to $642.1 million, down from $678.7 million a year ago.
Peloton shares are down 25% in intraday trading.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| PTON | PELOTON INTERACTIVE INC. | 9.07 | +0.71 | +8.55% |
Cari Gundee rides her Peloton exercise bike at her home on April 6, 2020, in San Anselmo, California. ((Photo by Ezra Shaw/Getty Images) / Getty Images)
This adds to the list of woes for the company that has been trying to reverse the decline in demand for its equipment by expanding access to its content with more membership tiers.
Aside from seasonal trends, growth also slowed due to its recent bike recall. In May, the company recalled more than 2 million bikes due to an issue with the seat post detaching.
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Sales of the bike were constrained by "seat post availability," according to Peloton. The company said it had approximately 750,000 requests for replacement seat posts, which was more than anticipated.
Peloton fulfilled just more than 340,000 and expects to fulfill the rest by the end of September.
A person walks past a Peloton store in the Manhattan borough of New York City, Jan. 25, 2022. (REUTERS/Carlo Allegri/File Photo / Reuters Photos)
As a result, up to 20,000 of its members opted to pause their subscriptions until they get a replacement seat, the company said.
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The recall cost the company an additional $40 million during the quarter due to "actual costs incurred as well as anticipated future recall-related expenses."
The company expects to burn cash during the next two quarters "mainly due to seasonality of our hardware sales, timing of inventory payments" as well as marketing spend for the holiday season and expenses related to its recent bike recall.
The company forecast fiscal first-quarter revenue between $580 million and $600 million, below Refinitiv estimates of $655.9 million.