Peloton (PTON) reports Q4 2021 loss

Peloton said Thursday its fiscal fourth-quarter loss widened as the pace of revenue growth slowed dramatically and costs associated with a treadmill recall mounted.

Shares tumbled about 7% in extended trading on the news.

Peloton warned its earnings will be hurt in the near term because it’s slashing the price of its original bike by about 20%. It’s also beginning to shift its business mix back toward treadmill sales, which are less profitable than those of its cycles.

The company separately disclosed it found a problem with the way it has been accounting for inventory. An audit of fiscal 2021, which ended on June 30, discovered a “material weakness” in the internal controls that govern Peloton’s financial reporting. It will not, however, result in the restatement of any of its past results.

Peloton offered up a disappointing first-quarter revenue outlook. The company faces heightened commodity costs and freight prices, while it plans to ramp up marketing spending in the months ahead.

Here’s how Peloton did for the quarter ended June 30 compared with what Wall Street was expecting, using a survey of analysts by Refinitiv:

• Loss per share: $1.05 vs. 45 cents expected
• Revenue: $936.9 million vs. $927.2 million expected

Peloton posted a net loss of $313.2 million, or $1.05 per share, compared with net income of $89.1 million, or 27 cents a share, a year earlier. That came in larger than the 45-cent loss forecast by analysts polled by Refinitiv.

Total revenue grew 54% to $936.9 million from $607.1 million a year earlier, topping estimates for $927.2 million. But the pace of growth slowed from the third quarter, when sales more than doubled from year-ago levels and topped $1 billion.

Growth tapered off, in part, due to Peloton recalling both its Tread and Tread+ treadmill products in May, and temporarily halting sales of the machines. Its less expensive Tread is set to go on sale next week. The company has not yet said when it will resume sales of the Tread+.

But the cycle maker also faces stiffer competition from other at-home fitness businesses, such as Hydrow, Tonal and Lululemon-owned Mirror. And as pandemic restrictions are lifted, more consumers are opting to head back to the gym or take in-person group classes.

“The past year represented an inflection point for the connected fitness industry, with significant increases in awareness and demand following the onset of the Covid-19 pandemic,” Chief Executive John Foley wrote in a letter to shareholders.

Revenue from Peloton’s connected fitness segment, which includes contributions from the company’s acquisition of Precor, rose 35% year over year to $655.3 million, representing 70% of total revenue. Subscription revenue was up 132% to $281.6 million.