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Peloton's Holiday Quarter Revenue Falls, but It Beats Estimates

February 1, 2024
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Peloton Interactive Inc. has acknowledged the initial success of some recent initiatives, but its future outlook suggests ongoing challenges for the once-thriving company, which had experienced a surge in popularity during the pandemic. Despite efforts to diversify and reinvigorate the brand post-pandemic, Peloton faces obstacles, as indicated by its projections for the March quarter and the full fiscal year.

For the upcoming March quarter, Peloton anticipates revenue in the range of $700 million to $725 million, falling short of the FactSet consensus estimate of $749 million. Additionally, the company foresees a loss of $20 million to $30 million on the basis of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), in contrast to analysts' expectations of a $2 million loss.

Looking at the entire fiscal year, Peloton's revenue projection stands at $2.675 billion to $2.750 billion, accompanied by an anticipated adjusted EBITDA loss ranging from $25 million to $75 million. This forecast differs from the FactSet consensus, which predicted $2.739 billion in revenue and a $40 million adjusted EBITDA loss. Despite these projections, Peloton's Chief Executive, Barry McCarthy, expressed optimism in a shareholder letter but acknowledged the need for performance improvement during the quarter.

In response to Peloton's financial outlook, its stock experienced an approximately 8% decline in premarket trading on Thursday. This downward trend follows a period of decreasing sales during the holiday quarter, although the revenue exceeded expectations. Peloton, like many companies navigating the post-pandemic landscape, has been striving to revive momentum, with various initiatives showing mixed results.

One positive aspect highlighted by McCarthy is the notable sales growth through third-party retailers, including Dick's Sporting Goods Inc. and Amazon.com Inc. Additionally, Peloton's rental program for its Bike product has attracted a more diverse, female, and younger customer base compared to six months ago. However, not all initiatives have proven successful, such as the co-branded bike with the University of Michigan, which Peloton has decided to discontinue due to lower-than-expected sales to alumni and boosters.

McCarthy also addressed challenges within the company's customer-service team during the critical holiday selling period, acknowledging that the Member Support experience has affected the brand negatively. He emphasized the ongoing efforts to improve this aspect of the business, describing it as a "reboot" currently underway.

Peloton reported a net loss of $194.9 million, or 54 cents per share, for the fiscal second quarter, an improvement from the $335.4 million loss, or 98 cents per share, in the same period the previous year. Despite beating analyst expectations for a 54-cent per-share loss, the company reported a loss of $82 million on the basis of adjusted EBITDA, slightly higher than the $78 million consensus estimate. Revenue for the quarter reached $744 million, surpassing the FactSet consensus of $733 million.

Peloton concluded the quarter with 3.004 million paid connected fitness subscribers, showing growth compared to the September quarter and the prior year's December quarter, although analysts had predicted a slightly lower figure of 2.989 million.

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Valentyna Semerenko
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