Peloton shares fall despite earnings beat as bike maker warns of ongoing supply constraints

Peloton Interactive Inc. stationary bicycles sit on display at the company’s showroom on Madison Avenue in New York, U.S., on Wednesday, Dec. 18, 2019.
Jeenah Moon | Bloomberg | Getty Images

Peloton on Thursday reported quarterly sales growth of 232%, exceeding the company’s expectations, as consumers turned to its bikes and treadmills to work out and stream live classes from home during the coronavirus pandemic.

The bike maker raised its revenue outlook for fiscal 2021 and now expects to report $3.9 billion or more in total revenue, up from a prior range of $3.5 billion to $3.65 billion. Analysts had been calling for $3.63 billion, according to a Refinitiv survey. Peloton also expects this holiday quarter to be its first billion-dollar quarter for sales.

The company has been a huge beneficiary of more people staying at home in 2020. But with such heightened demand for its products, Peloton has struggled to keep up. Customers have also reported delayed shipments and poor service. The company said Thursday it expects to be operating under supply constraints “for the foreseeable future.”

“As we rapidly scale our organization to meet the extraordinary demand for our products, we realize that some of our members have faced extended delays associated with receiving our products or having support requests fulfilled,” CEO John Foley said in a letter to shareholders.

Peloton shares whipsawed in after-hours trading and recently were down around 4.5%, having skyrocketed more than 343% this year. The stock closed Thursday up nearly 7%.

Here’s what the company reported for its fiscal first quarter of 2021, compared with what analysts were expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: 20 cents vs. 11 cents expected
  • Revenue: $757.9 million vs. $748.1 million expected

Peloton said it expects profits to be pressured as it quickly opens new manufacturing facilities and because of the extra shipping-related expenses it will incur during the busy holiday season.

For the three months ended Sept. 30, Peloton said earnings rose to $69.3 million, or 20 cents per share, from a loss of $49.8 million, or $1.29 a share, a year earlier. Analysts had expected Peloton to earn 11 cents per share.

Sales surged 232% to $757.9 million from $228 million a year ago, topping expectations for $748.1 million.

Peloton said it ended the quarter with more than 1.33 million connected fitness subscribers, up 137% from a year earlier. Connected fitness subscribers are people who pay $39 per month to sync Peloton’s workout classes to their Peloton equipment versus accessing the programs separately through a phone or tablet device and paying just $12.99.

Peloton is also proving during the pandemic that once it hooks a new customer, they tend to stick around. It has gained a wave of new users who are no longer paying to go to the gym. Average net monthly connected fitness churn was 0.65% during the latest period, compared with 0.75% in the prior quarter.

The company is now predicting its fiscal 2021 churn rate will remain under 0.9%, compared with a prior forecast of under 1%. It said churn for the current quarter should stay below 0.85%.

Peloton also expects to have 1.63 million connected fitness subscribers by the end of its fiscal second quarter, and 2.17 million by the end of the fiscal year. It’s calling for second-quarter revenue of $1 billion. Analysts were predicting $939 million.

The Sept. 9 launch of the Peloton Bike+, which includes more features than its original spinning bike and costs $2,495, “drove call volumes and unacceptably long wait times, well beyond our expectations,” Foley said.

Peloton said it hopes to meet normalized order-to-delivery windows for its bikes by the end of the calendar year but that wait times for its Bike+ “will likely be elevated for the next couple of quarters.”

Peloton’s users continue to work out more, too. That’s due, in part, to some households sharing their memberships among multiple people. The company said its connected fitness subscribers are averaging 20.7 monthly workouts, up from 11.7 a year earlier.

The company also said it continues to ramp up its content production, making more than 2,400 new classes during the quarter, to make sure its members don’t grow bored of their bikes. It launched a new Bike Bootcamp and Barre classes during the quarter.

Peloton has a market cap of $36.9 billion.

Find the full Peloton earnings press release here.

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