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Peloton, the maker of connected fitness bikes and one of the hottest companies in the early days of the pandemic, announced Tuesday that it lost $757 million in the first three months of the year, far more than analysts were expecting. It also burned through roughly the same amount of cash.
It was the first earnings report under Peloton’s new chief executive, Barry McCarthy. Since taking the reins, Mr. McCarthy has focused on addressing supply chain issues, lowering costs and experimenting with the company’s pricing model. “Turnarounds are hard work,” Mr. McCarthy wrote in a letter to shareholders on Tuesday.
The quarter included more than $200 million in write-downs, with about $30 million of that covering inventory that the company no longer thinks it can sell. Membership was up just 5 percent from the previous quarter, to seven million. And revenue fell 24 percent, to $964 million. Sixty percent of that came from products, and 40 percent from subscriptions.
The company has $879 million in cash, which according to Mr. McCarthy leaves Peloton “thinly capitalized for a business of our scale.” Peloton signed a binding commitment letter this week with JPMorgan Chase and Goldman Sachs for a $750 million loan.
Peloton’s earnings drop is yet another sign that the pandemic bubble has burst. Shares of Peloton were down 13 percent, or nearly $2, to just over $12 each, on the news by midday Tuesday. The company now has a market value of about $4 billion, down more than 90 percent from its high in early 2021 of $47 billion. Shares of Zoom, another pandemic darling, are also down more than 80 percent from October 2020. The virtual conferencing company now has a market value of $26 billion, or slightly less than its value before the pandemic.
Mr. McCarthy, on a conference call with analysts after the earnings release, said his objective was to have Peloton’s business generating cash, rather than depleting what the company has in the bank, by the middle of next year. He said he was “very confident we’ve got plenty of capital to do that, regardless of what happens in the economy.”
Article source: https://www.nytimes.com/live/2022/05/10/business/economy-news-stocks-inflation