Peloton Stock Slumps On Wider Q4 Loss, McCarthy Bets On Turnaround

Peloton Interactive  (PTON)  shares slumped lower Thursday after the bike and treadmill maker posted a surprise fourth quarter loss, and a big slump in sales, and cautioned the conditions in the connected fitness market would remain ‘challenging’ for the foreseeable future.

Peloton said its adjusted loss for the three months ending in March, the group’s fiscal third quarter, was pegged at $3.68, well outside the Street consensus forecast and more than triple the loss it recorded over the same period last year. Group revenues, Peloton said, fell 26.6% from last year to $687.7million, again missing analysts’ estimates of a $718.1 million tally, while operating expenses surged 110% to $1.17 billion.

Looking into the current quarter, the first of its 2023 fiscal year, Peloton said it sees revenues in the region of $625 million to $650 million, with connected fitness subscribers essentially unchanged from the prior period at 2.966 million.

“The naysayers will look at our Q4 financial performance and see a melting pot of declining revenue, negative gross margin, and deeper operating losses,” CEO Barry McCarthy said in a letter to shareholders. “They will say these threaten the viability of the business.”

“But what I see is significant progress driving our comeback and Peloton’s long-term resilience,” he added. “When we look in the rear-view mirror, I think Q4 will have been the high water mark for write-offs and restructuring charges related to inventory and supply chain issues and the beginning of the comeback story for Peloton.”

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Peloton shares were marked 15% lower in pre-market trading following the earnings release to indicate an opening bell price of $11.46 each. 

Earlier this week, Peloton unveiled a deal with Amazon AMZN to sell its signature exercise bike, as well as other apparel and accessories, through the world’s biggest online retailer.

The moves follows last week’s decision to boost prices for its Bike+ and Treadmill by between 25% and 30% in various markets around the world amid some of the fastest consumer prices increases in more than four decades, as well as a series of supply-chain snarls that have complicated the group’s in-house production.

Last month, Peloton said it would stop making its flagship exercise bike in-house and instead expand a manufacturing contract with a group in Taiwan.

Rexon Industrial Corp will be the primary manufacturer of Pelton’s fitness equipment, including its iconic stationary bike and its popular treadmill.

Peloton said the shift forms part of its strategy to both simplify its supply chain and focus on technology and content under McCarthy’s turnaround plans.

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