July 15, 2024


We Do Health Right

Peloton Shares Plunge As CEO Warns Fitness Company Is ‘Thinly Capitalized’



Shares of Peloton cratered nearly 10% on Tuesday after dismal quarterly earnings that showed the at-home fitness company is continuing to lose money at a torrid pace, with recently appointed CEO Barry McCarthy warning that turning the business around will take some time.

Key Facts

Peloton’s stock was sitting near record lows late Tuesday morning at less than $12 per share.

Struggling with lower customer demand as people return to gyms following the end of pandemic safety precautions, the at-home fitness equipment maker recorded a loss of $757 million in the quarter ending March 31, compared to a quarterly loss of just $8.6 million a year ago.

Revenue also came in short of expectations, dropping 15% to $964 million, which is Peloton’s first year-over-year sales decline since it went public in 2019.

Peloton finished the quarter “thinly capitalized” with $879 million in cash, according to McCarthy, down from over $1.1 billion a year ago.

With sales slowing, the company is carrying a large inventory of unsold bikes and treadmills even after slashing prices last month, which has “consumed an enormous amount of cash, more than we expected,” McCarthy said.

Peloton added 195,000 new subscribers—less than half the amount added in the same period a year ago, while management also forecast just $700 million in sales this quarter, which is well below the more than $800 million expected by analysts.

Surprising Fact:

Peloton’s stock is down 64% so far in 2022, having fallen roughly 90% from its all-time high in late 2020, when business surged during pandemic lockdowns.

What To Watch For:

To help shore up the balance sheet, Peloton is borrowing $750 million in a five-year debt agreement with JPMorgan and Goldman Sachs, according to McCarthy. The loan agreement will keep the company afloat and keep operations running, though the Peloton CEO also hinted that the company may need more outside financing beyond that.

Crucial Quote:

“Turnarounds are hard work,” McCarthy told investors in a shareholder letter, warning that it would be some time before Peloton bounces back. He remains confident that the company can return to positive free cash flow by fiscal 2023, however, saying on the earnings call that the fresh $750 million loan will help the company have “plenty of capital to do that.”

Further Reading:

Peloton Hikes Membership Price But Cuts Equipment Costs (Forbes)

Peloton Shares Fall After New CEO Says Company Won’t Be Sold In The ‘Foreseeable Future’ (Forbes)

Can Peloton Be Saved? Here’s What Experts Say About The New CEO, Barry McCarthy (Forbes)

Pandemic Darling No More: Peloton’s Dramatic Crash In 4 Charts (Forbes)


Source link