Peloton sinks after disappointing fourth quarter

Home exercise firm slashes price of its signature bike after a fall in demand

Peloton stock sank in pre-market trading on Friday, after the company reported a sharp fall in demand for its equipment. 

Having IPO’d in late 2019, the provider of home exercising equipment was perfectly positioned to capitalise on the changes in habits engendered by the COVID-19 lockdowns. Indeed, the firm’s stock rose by almost 400% in 2020 and reached a record high of $171.09. 

The company has slipped by around a quarter since this high, weighed down by the reopening of gyms and a well-publicised treadmill recall after the death of a child. 

Peloton was able, however, to maintain shareholder interest by pointing to the rapid expansion of its stores and services. In late 2020, it purchased Precor, a leading provider of workout machines to hotels and gyms, for $420m. 

Q4 results disappoint

Investor sentiment was nonetheless dented late on Thursday, when the company announced worse-than-anticipated fourth quarter results. Peloton swung to a $313.2m, or $1.05 a share, having reported earnings of 27 cents per share a year ago.

The loss came despite sales rising by $330m on last year’s fourth quarter to $937m. Indeed for the full fiscal year, the firm’s sales more than doubled from $1.83bn to $4bn. 

Bike price cut to impact immediate profitability

In order to maintain its position in the post-COVID marketplace, the company announced it would slash the price of its famously expensive at-home bicycle machine by around 20% to $1,495. 

The company admitted: “In the near term, our profitability will be impacted by the price decrease in our original Bike, significant increases in commodity costs and freight rate increases, a sales mix shift to Tread, investments in marketing to broaden our appeal, accelerated investments in new products and features, investments to scale our Member support and logistics operations, and significant investments in systems to support our growth.”

Peloton traded down by 7.5% before Friday’s opening bell at $105.71, having started the year at $145.96. 

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