Peloton Interactive (NASDAQ:PTON), the exercise equipment manufacturer, managed to surpass sales projections for its fiscal fourth quarter, but the company reported a larger loss than anticipated, partly attributed to costs related to a product recall and shifting consumer spending trends.
The company’s shares experienced a significant drop of more than 27% prior to the market opening on Wednesday.
Although revenue declined from $678.7 million to $642.1 million in the quarter, it still outperformed analysts’ expectations of $640.5 million, as per Investment Research.
While subscription revenue experienced a 10% rise, revenue from connected fitness products saw a decrease of 25%.
The company witnessed a 5% decrease in its membership count, with numbers falling from 6.9 million to 6.5 million.
In a letter addressed to shareholders, Peloton’s President and CEO, Barry McCarthy, acknowledged that consumers had shifted their spending towards travel and experiences. However, he noted that the New York-based company was observing an increase in hardware sales.
McCarthy also mentioned that the costs associated with a seat post recall, which was announced in May, had exceeded initial estimations significantly.
He elaborated, “An estimated 15,000 to 20,000 of our 2.2 million impacted members chose to suspend their monthly subscriptions in Q4 while waiting for a replacement seat post.”
Peloton Interactive Inc. reported a loss of $241.8 million, equivalent to 68 cents per share, for the period ending on June 30. This contrasts with the prior year when the company incurred a loss of $1.26 billion, or $3.72 per share.
Wall Street analysts had predicted a loss of 45 cents per share.
McCarthy expressed caution regarding the upcoming quarters, stating, “We do not anticipate remaining cash flow positive in the next two quarters, primarily due to the seasonal nature of hardware sales, inventory payment timing, increased marketing expenditure as we invest in growth and prepare for the holiday season, and a one-time expense for seat posts. However, we do anticipate achieving this goal once more in the second half of fiscal 2024.”
Additionally, Peloton intends to resume pre-sales of its Tread+ treadmill in the United States during the holiday season. McCarthy revealed that the Consumer Product Safety Commission had approved the design of a new rear guard for the product during the past quarter. Peloton plans to retrofit existing Tread+ units later this year and will install the new rear guard upon request for members, with approximately 17,000 requests received to date.
Looking ahead to the first quarter, Peloton anticipates revenue in the range of $580 million to $600 million.
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Author Stephanie Bédard-Châteauneuf 
