Peloton’s earnings were even worse than expected

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Market watchers were expecting a tough quarter for Peloton, but not that bad. The beleaguered connected fitness company underestimated revenue by $6 million, reporting $964.3 million, down from $1.26 billion from the same period last year. Losses for the quarter amounted to $757.1 million.

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All eyes are on new CEO Barry McCarthy, who replaced embattled co-founder John Foley back in February. “Recovery is hard work,” McCarthy wrote, opening the letter to company shareholders on a fittingly sombre note. “It’s intellectually challenging, emotionally draining, physically tiring and all-consuming. It’s a full contact sport.”

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McCarthy acknowledged the company’s difficulties following the rapid growth caused by the pandemic. It was an issue that Foley largely dismissed as overpriced during his tenure with the company, but after Peloton ramped up production to meet new demand, the reopening of the gyms helped boost inventory.

“The balance issue was inventory management,” the CEO noted. “We have too much for the current speed of the business, and these inventories are consuming a huge amount of cash, more than we expected, which forced us to rethink our capital structure (more on that in a moment). Fortunately, the risk of obsolescence is negligible and we believe inventory will eventually be sold, so this is primarily a cash flow timing issue rather than a structural issue.”

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The company also faced an increase in the price of the monthly subscription fee on June 1st. The executive noted the “modest” churn rate, suggesting that if things stay at current levels, the company will increase revenue by $14 million a month. . It remains to be seen if additional subscribers will leave when these price increases go into effect.

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Credit: techcrunch.com /

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