Peloton Stock Tumbles as Company Predicts Another Sales Decline 

Peloton Stock

Peloton Interactive Inc. (NASDAQ:PTON) has projected another sales decline for the current quarter, contrary to Wall Street expectations for a return to growth. The fitness technology company anticipates revenue of $700 million to $725 million in its fiscal third quarter, falling short of the $755.6 million estimated by analysts on average. This reflects a decline from approximately $749 million in the same period a year ago.

Peloton has been grappling with a post-pandemic slump, and despite better-than-expected holiday season sales, CEO Barry McCarthy is working to steer the company back to growth. The high-profile entry into the college market, beginning with a partnership with the University of Michigan, failed to generate sufficient sales and will be phased out.

The company’s shares fell as much as 15%, the most in over five months, reaching $4.74 in New York. Peloton’s stock has been on a downward trend, having already fallen 8.7% in 2024, adding to declines in 2021, 2022, and 2023. It is down over 90% from its pandemic highs.

McCarthy acknowledged the challenge of achieving growth “at scale,” stating that revenue is not expected to start increasing until the fourth quarter, which extends through June. Peloton has faced declining revenue for two years, following a surge in sales during the early days of the COVID-19 pandemic.

For the current quarter, Peloton expects paid app subscriptions to decline by about 13%, ranging from 730,000 to 750,000. Despite a decline in revenue during the holiday period, it surpassed estimates at $743.6 million and reached the upper end of the company’s guidance.

While paid subscribers using Peloton’s fitness equipment showed 1% annual growth, totaling 3 million in the second quarter, paid subscribers to the app, which delivers content via phones and tablets, declined by 16% to 718,000. Total members, including paid and unpaid users across Peloton’s platforms, were 6.4 million in the holiday quarter, down 4% from the previous year.

Achieving positive free cash flow is a crucial element of McCarthy’s turnaround efforts, initiated when he assumed the CEO role in February 2022. Peloton might miss that goal in fiscal 2024, but McCarthy believes it could be attained in the fourth quarter.

McCarthy expressed dissatisfaction with Peloton’s customer service, acknowledging that quality problems had “tarnished” the brand. The customer service division is undergoing a “reboot” with new management, systems, and third-party vendors.

However, McCarthy highlighted positive aspects of the business, noting a 72% increase in sales through retailers like Dick’s Sporting Goods and Amazon over the holidays. The bike rental program is expected to achieve 100% growth in fiscal 2024, and demand for the high-end treadmill, making a return after a product recall, exceeded expectations.

Peloton’s partnerships with TikTok and other companies, along with McCarthy’s restructuring efforts, including mass layoffs, outsourcing, and management changes, are part of the broader turnaround strategy for the company.

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