What’s going on?
Peloton reported worse-than-expected results late last week, as its audience’s devotion to the latest fitness fad once again ran out of steam.
What does this mean?
With gyms back in action last quarter, at-home exercise equipment fell out of favor and Peloton’s revenue growth dropped off dramatically. That, coupled with costs from an expensive treadmill recall, saw the company post a bigger-than-expected loss. It wasn’t optimistic about this quarter either: Peloton just slashed the price of its exercise bikes by around 20% in an attempt to get customers back on its saddles, and it’ll be shifting its business back toward less-profitable treadmills. And it’s a good thing Peloton likes to feel the burn, because this class isn’t over yet: the company also revealed it’d found a problem with the way it’s been valuing its inventory. That won’t change any of its previous financial reports, but it’s bound to make investors break out in a sweat…
Why should I care?
For markets: Someone get the Deep Heat.
Peloton had a heck of a run in 2020, with its shares rising more than 400% as people took to exercising at home during lockdown. But the company’s stock plummeted almost 10% on Friday after the disappointing results, which is just another painful cramp in a year full of them: Peloton’s lost more than 30% of its value this year.
The bigger picture: So much for a solo ride.
Even worse, Peloton – which as recently as last year had the “connected fitness” market all to itself – now has to go toe to toe with the likes of Hydrow, Tonal, and Lululemon-owned Mirror. And those chiseled rivals are already starting to push Peloton to its limits: last week’s exercise bike price cut was the second one in less than a year, and the company spent almost three times as much on sales and marketing last quarter compared to the same time last year.