Peloton Interactive Inc (NASDAQ:PTON) stock traded down US$1.44 or 20.53% on Wednesday, changing hands at US$5.54, after its latest major profit warning.
Fourth quarter revenue missed wall street expectations as costly equipment recalls are mount and whilst increasing numbers of users are pausing or cancelling subscriptions.
It all added up to a loss of US$242 million for the quarter, that’s 68 cents which is significantly higher than Wall Street consensus, pitched at 40 cents per share.
Peloton said it had lost 29,000 paying members in the quarter, due to what the company claimed was a “seasonal slowdown in hardware sales”. Membership numbers shrunk by 5% year-on-year to 6.5 million, driving an adjusted loss of US$34.7 million.
However, istributing unsafe equipment, yet again, proved costly for Peloton.
Having to recall and slow the distribution of its Peloton bike because of a hazardous seat post issue, the US group said 750,000 customers requested replacements, which it claimed was “more than we expected”.
So far, the company has met 340,000 of the requests, while the remaining replacements are expected to be sorted by September, which is later than members wanted.
Up to 20,000 members have paused their subscription because of the issue and the replacements are believed to have cost Peloton around US$40 million in expenses in the fourth quarter – significantly worse than analysts predicted.
Looking forward, Peloton is launching several initiatives aimed at accelerating growth, although Barry McCarthy, the group’s chief executive officer, noted that the company has only forecast some of the expenses and none of the revenue it hopes these measures will generate in financial year 2024.
"That means there could be significant upside to our financial performance later this year, or none at all. I’m signaling significant potential upside but considerable uncertainty, in the spirit of radical transparency," McCarthy said.