Bike price cut, rising costs to hit Peloton's profitability

The move, aimed at making its bikes more affordable, will weigh on its performance in the first quarter.
The move, aimed at making its bikes more affordable, will weigh on its performance in the first quarter.PHOTO: REUTERS

BENGALARU (REUTERS) - Peloton Interactive Inc said on Thursday (Aug 26) its near-term profitability would suffer due to a decision to slash the price of its exercise bike and higher commodity and marketing costs.

The fitness equipment maker also introduced monthly financing options for its Bike+ and Tread products across all regions, as it looks to prevent a slowdown in its business after last year's home fitness boom.

The moves, aimed at making its bikes more affordable, will weigh on its performance in the first quarter. The company's revenue forecast of US$800 million ($1.08 billion) was below analysts' average estimate of US$1.01 billion, according to Refinitiv data.

Its shares fell as much as 15 per cent after the bell but pared losses to trade down 6 per cent.

Peloton's original bike will now cost US$1,495, compared with US$1,895 earlier, and the company will also shift its product sales mix towards its treadmill.

New York-based Peloton said it expects a return to profitability on an adjusted core earnings basis by the financial year 2023.

In the near term, it plans on prioritising subscription growth and reducing the time gap between sales and delivery.

"We are planning fiscal 2022 as an investment year in marketing our products and optimising operations," chief financial officer Jill Woodworth said on an earnings call.

Peloton posted a net loss attributable to Class A and Class B shareholders of US$1.05 per share, in the quarter ended June 30, compared with a profit of 27 US cents per share a year earlier.

Analysts on average were expecting a loss of 45 US cents per share.

Peloton, which also disclosed a material weakness in its internal control over financial reporting, said fourth-quarter revenue rose 54 per cent to US$936.9 million. The figure was better than estimates.