Peloton Interactive lost more than one-fourth of its value on the stock exchange as the company slashed its sales guidance for the full financial year by up to $1 billion, predicting that revenues will range from $4.4 billion to $4.8 billion. Analysts were budgeting sales of $5.4 billion for the year.
The management is also predicting a lower-than-expected gross margin of 32 percent for the year – 16 percent for equipment and 70 percent from subscriptions – and an Ebitda loss of $425 million to $475 million, up from a previously predicted level of $325 million. It sees the company delivering positive Ebitda only in the 2022/23 financial year.
The number of connected fitness subscribers is now predicted to amount this year to between 3.35 million and 3.45 million as compared to a previous outlook of 3.63 million. Evidently referring to a movement from home fitness back to the gyms, the management attributed the downward revisions to “a more pronounced tapering of demand related to the ongoing opening of the economy” and higher-than-anticipated sales of the company’s original Bike, which has been discounted.
For its first quarter ended Sept. 30, Peloton reported a higher-than-expected net loss of $376 million, compared with a first-ever profit of $69.3 million in the year-ago period, on 6 percent higher revenues of $805.2 million. It posted an Ebitda loss of $233.7 million for the quarter compared with positive Ebitda of $118.9 million.
The management indicated that it will adjust its operating expenses to its new sales forecasts. In the latest quarter, its marketing expenses jumped by 148 percent from last year’s depressed level to a more normalized level of $284.3 million. R&D costs soared by 167 percent to $97.7 million on higher personnel charges and investments in the development of new products and software.
Equipment sales were up by 17 percent to $501.0 million in the latest quarter, thanks in part to the new contribution from Precor, but the price cut on the original Bike, the recall of the Tread and higher supply chain and logistics costs led to a huge drop of 27.4 percentage points in the segment’s gross margin, down to 12.0 percent from 39.4 percent a year ago.
On the other hand, revenues from subscriptions jumped by 94 percent to $304.1 million compared with a year ago as the number of connected subscribers grew by 87 percent to 2,491,711 and paid digital subscriptions, including corporate partnerships, rose by 74 percent to 887,000. On average, they engaged in only 16.5 workouts per month, however, down from 20.7. The segment’s gross margin improved by 8.2 percentage points to 66.7 percent.
