How Peloton ended up running out of steam on Wall Street


End of race for Peloton? “ It’s a company that enjoys a huge number of followers and a great community, but it’s also grown too big and too fast. “, Estimates Simeon Siegel, analyst at BMO, quoted by CNBC. Praised by the spring 2020 health crisis, the specialist in ultra-connected exercise bikes and treadmills has experienced a meteoric rise. Its high-tech products have been snapped up like hot cakes by consumers frustrated at not being able to go to the gym or even go out to let off steam. This enthusiasm allowed Peloton to escape… Its turnover doubled twice, in 2019-2020 then in 2020-2021, to reach, at the end of June 2021, 4 billion dollars. On the stock market, the acceleration was more impressive: the stock soared 434% in 2020. Was the momentum too good to last? This is the question investors are asking. In 2021, the title has already surrendered 76% of its lead, but it was above all the session on Thursday January 20 that was fatal to it.

Trading was halted four times on the Nasdaq Composite, before the stock ended in a 24% free fall to $24.22. According to an internal memo seen by CNBC, Petolon plans to suspend manufacturing of its standard connected bikes for two months, February and March, and its Tread connected treadmill for six weeks. Worse, no Tread+ machine should be produced in 2022. Their production had already been stopped last year due to a security problem. ” There are thousands of bicycles and treadmills in warehouses or on cargo ships, and the group must redo its inventories “Writes the American site of economic and financial information. The reason for this slowdown would find its origin in the ” significant reduction » in demand, as a result of pressure on purchasing power and increased competition. The return to normal life also affects Peloton’s performance.

Towards job cuts?

Between July and September, the group attracted only 161,000 subscribers to its online workout programs, the lowest number in two years, and it had to settle for a 6.2% increase, to 805.2 million dollars, of its turnover. A year ago, at the same time, its sales jumped by… 250%. Monthly net churn, used to measure connected fitness subscriber retention, reached 0.82%, compared to 0.73% in the prior quarter. And subscribers averaged 16.6 workouts per month, up from 20.7 a year earlier.

The horizon does not seem to clear up. Already high, the prices of bicycles and treadmills marketed by Peloton will rise further, as a result of rising raw material and transport costs. ” Right now the prices are going up. Ikea just increased them. We want to go in the middle of the pack Peloton’s marketing and communications manager Dara Treseder said. By passing on price increases to its customers and asking them to bear the cost of installing hardware, Peloton is taking a risk. But for the American group, the argument is elsewhere: it intends not to further widen its losses, which amounted to 376 million dollars in the last quarter. Faced with a crisis situation, Peloton froze hiring and called on the management consulting firm McKinsey & Co. to review its cost structure. Job cuts are not ruled out, reports CNBC. Today, the group employs some 6,800 people in the United States, double the number a year ago. The “clothing” division, whose sales have been particularly weak, could be targeted. In early November, management slashed its outlook for 2022, now expecting revenue of around $4.4 billion to $4.8 billion, compared to $5.4 billion previously. The number of subscribers is expected to be between 3.35 million and 3.45 million, down from the current 3.63 million.


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