Peloton headwinds stiffen as people break pandemic routines
Peloton’s uphill ride to get more sales is getting rougher as more people return to gyms and other prepandemic exercise routines and embrace cheaper options.
The maker of high-end exercise bikes and treadmills, once highflying in the early days of the pandemic, on Tuesday reported mounting losses and slowing sale. It also offered a bleak sales outlook for the current quarter and said it had signed a commitment to borrow hundreds of millions of dollars, raising questions for some investors about the chances of a turnaround.
“Peloton has a lot of work to do to convince investors that the business model still works,” said Neil Saunders, managing director of GlobalData Retail. “It’s coming off a high. People were at home and wanted to stay fit. But now people are starting to go back to the gyms. They want the social aspect.”
The maker of high-end exercise bikes and treadmills thrived during COVID-19 outbreaks and sales growth for the New York City company doubled in 2020 and surged 120% in its last fiscal year.
The arrival of effective vaccines and easing COVID-19 restrictions, however, have opened up more options for Americans seeking exercise and Peloton has suffered. In February the company announced a major restructuring and abandoned plans to open its first U.S. factory, which would have employed 2,000 workers in Ohio. Co-founder John Foley stepped down as CEO and the company said it would cut nearly 3,000 jobs.
Peloton ramped up fast during the pandemic, increasing its subscriber base from 700,000 to 3 million, but that growth has slowed, and company misjudged the slowing demand and continued to churn out expensive hardware, creating a sizeable inventory of unsold stationary bikes.
Peloton’s initial success also created competition, with companies peeling away customers by selling cheaper connected stationary bicycles and exercise equipment. High-end gyms also jumped into the game, offering virtual classes that once were Peloton’s biggest draws.
The data released Tuesday raised more questions about how the company will move forward.