Peloton Interactive Inc. stationary bikes are on display in the company's showroom at Madison Avenue, New York, U.S.A, Wednesday, December 18, 2019.
Peloton announced Thursday that its fourth quarter fiscal loss was widened due to slower revenue growth and increased costs related to a treadmill recall.
Extended trading on the news sent shares plummeting by 7%
Peloton has warned that its earnings may be affected in the short term as it is slashing its price for its original bike by 20%. Peloton is also shifting its business mix to treadmill sales, which are less lucrative than its cycles.
Separately, the company disclosed that it had discovered a problem in its inventory accounting. Peloton's fiscal 2021 audit, which concluded June 30, revealed a "material flaw" in its internal controls. However, it will not result in any restatement of its past results.
Peloton's first quarter revenue outlook was disappointing. Peloton is facing higher commodity costs and freight rates, but it intends to increase its marketing spending over the coming months.
This is how Peloton performed for the quarter ending June 30, compared to what Wall Street expected, based on a survey of analysts from Refinitiv.
Loss per share: $1.05 vs. 45 cents expected
Revenue: $936.9 million vs. $927.2 million expected
Peloton reported a net loss in the amount of $313.2million, or $1.05 per share. This compares to a net income of $89.1million, or 27c a share, one year ago. This was more than the 45 cent loss that Refinitiv analysts had predicted.
The total revenue increased 54% to $936.9million, compared to $607.1 million a previous year. This was above the estimates of $927.2 million. The pace of growth was slower in the third quarter. Sales more than doubled compared to the previous year and reached $1 billion.
Peloton temporarily stopped sales of its Tread+ and Tread+ treadmills in May and caused growth to slow down. The Tread, which is less expensive, will go on sale next week. The company has yet to announce when the Tread+ will be available for sale again.
The cycle maker faces stiff competition from other home fitness businesses like Hydrow, Tonal, and Lululemon's Mirror. As pandemic restrictions are lifted consumers are returning to the gym and taking part in group classes.
John Foley, Chief Executive of Connected Fitness Industry, wrote that the past year was a turning point in the industry. He noted that there had been significant growth in awareness and demand since the Covid-19 pandemic.
Peloton's connected exercise segment, which includes contributions made by Precor's acquisition, saw revenue rise 35% year-over-year to $655.3 Million, or 70% of total revenue. Subscription revenue grew 132% to $281.6 Million.
