Peloton Crashes On Weak Holiday Outlook As “Macro-Economic Uncertainties” Plague Demand

Peloton CEO Barry McCarthy’s turnaround plan is stumbling. The personal fitness business reported that revenue came in well below Wall Street estimates as a challenging macroeconomic environment plagued demand. Shares crashed on the news as the turnaround story became a distant dream. 

In the quarter that ended Sept. 30, Peloton reported revenue of around $617 million, coming in below the company’s forecast of $625 million to $650 million.

Revenue: $616.5 million vs. $650.1 million, expected.
Loss per share: $1.20 vs. 64 cents, expected 

Peloton issued an outlook for the holiday quarter between $700 million and $725 million, missing the FactSet consensus of around $866 million and Refinitiv’s estimates of $874 million.

“Given macro-economic uncertainties, we believe near-term demand for Connected Fitness hardware is likely to remain challenged,” the company wrote in a statement. 

Shares crashed 21% in premarket trading Thursday. At Wednesday’s close, shares were down more than 75% on the year. If you can believe it, the company actually had a market valuation of $50 billion in early 2021.  

There was some good news for the maker of internet-connected bikes and treadmills, its $408.4 million loss was smaller than the prior quarter of $1.3 billion. As well as, the negative cash flow declined to only $246 million, down from $412 million the prior quarter. And two quarters ago, the company had a negative cash flow of $747 million. 

McCarthy told investors the turnaround is ahead of schedule, citing improvements to cash flow stemming from restructuring moves he executed earlier this year. 

“For the last nine months my goal has been to turn around Peloton and position it for sustained growth and scale,” McCarthy said in a statement. “I thought it would take a year. We are beating that timeline.”

McCarthy expects to reach break-even cash flow by June of next year. 

The company has undergone a series of leadership changes, layoffs, and other restructurings after misjudging pandemic demand for its at-home exercise equipment, leaving it with massive inventory. 

“The ship is turning,” McCarthy, a former Spotify and Netflix executive, added — despite shares crashing on a terrible earnings report.

The underwhelming demand outlook for the holiday quarter suggests that a turnaround plan could take time.