While Peloton Interactive Inc.'s management boasted that the fitness firm was ahead of schedule in its turnaround, its outlook for the current quarter was worse than Wall Street had expected. Around 19% of the share price was wiped off in premarket trading, according to Bloomberg's report.
Sales were down 23% compared to the previous year at this time. Peloton predicts sales between $700 million and $725 million for the holiday quarter, which runs through December. CNBC reported that it is an increase sequentially but still much lower than the $874 million predicted by analysts.
Peloton Struggles as the Pandemic-era Demand Ends
The forecast indicates that Peloton is still suffering from the aftereffects of the pandemic. The company sales had skyrocketed during the Covid-19 lockdowns. However, there was an oversupply of products after people returned to work and the gym.
Since becoming CEO in February, Barry McCarthy has worked on a turnaround strategy. The firm underwent significant changes, including a new corporate plan and widespread layoffs. The business has expanded from its original direct-to-consumer approach into partnerships with other merchants and a subscription-based business strategy. However, these efforts have failed to win over investors.
A 19% decline followed Wednesday's closing price of $8.63 for Peloton in premarket trading before New York's markets opened. In the previous year, the value of each share decreased by around 90%.
In a letter to investors, Bloomberg reported that McCarthy said Peloton is still working out the kinks in delivery times and customer experience, specifically of the company's site in New York. Nonetheless, he assured investors that Peloton has a solid core operation and is making progress toward his aim of producing free cash flow.
The Previous Quarters
Sales during the first quarter of the fiscal year dropped 23% to $616.5 million, far short of the average forecast of $641 million. The company saw a 36% increase in subscription revenue but a nearly 60% decrease in physical equipment sales, such as bikes and treadmills. The pre-tax loss was $33.4 million after adjustments for various factors.
Despite a boost in subscription income, the number of app users decreased to 875,000 from 896,000 in the prior year's fourth quarter. The monthly service for watching Peloton content on the company's devices saw a 19% increase in connected workout subscriptions.
Although the number of users increased by 6% annually, it dropped by 3% the quarter after quarter.
Based on Bloomberg's report, the adjusted loss for Peloton's second quarter will be between $100 million and $115 million. That is a lot worse than the expected loss of $97 million, according to experts. The estimate is mostly positive, with gross margins expected to rise nearly 36% from about 25% a year ago.
Despite falling short of projections, McCarthy said the firm is currently on track for "sustained growth and scale."
Read Also: Peloton Adds New Feature, Lanebreak, Turns Bike Rides Into a Game
This article is owned by Tech Times
Written by Trisha Kae Andrada
