End of lockdown wipes billions off Peloton’s market value

Shares in Peloton, Inc fell by a third on Friday, wiping $9 billion off the at-home connected fitness company’s market value, as exercisers flocked back to gyms as lockdown restrictions were lifted in key markets.

The New York City-based company was one of the big winners during the early months of the coronavirus pandemic, seeing its sales soar as restrictions in countries including the US and the UK caused gyms to close, leading to a boom in at-home fitness equipment.

Peloton, which has announced an immediate freeze on recruitment, has now slashed its full-year sales forecast from $5.4 billion to between $4.4 and $4.8 billion.

You might think it’s impossible to crash a stationary bike but Peloton managed to do it pic.twitter.com/xACIhrO1mL

— Morning Brew ☕️ (@MorningBrew) November 5, 2021

CNBC reports that in a conference call, CEO John Foley said: “It is clear that we underestimated the reopening impact on our company and the overall industry.”

He added: “From forecasting consumer demands to accurately predicting logistics costs, our teams have never seen a more complex operating environment in which to guide our expected results this year.”

The company also slashed the price of its entry-level Peloton bike by 20 per cent this year, squeezing margins and also cannibalising potential sales of its premium Peloton+ model.

The business, which besides generating revenue from actual products also derives income from subscriptions to its classes, also said that sign-up to those are lower than expected, as are sales through its physical stores.

It is now looking to slash costs across the business, with CFO Jill Woodworth saying: “Some of these identified areas of savings include making significant adjustments to our hiring plans across the company, optimising marketing spend and limiting showroom development.”

In an analyst note to clients, investment bank Credit Suisse said: “Demand is coming in lower on all fronts leading us to wonder when we might see a return on all the capital they have deployed.

“Long term, the connected fitness opportunity could still be intact but the path to get there appears more difficult,” it added.