• by Sarah Mahoney  @mahoney_sarah, August 24, 2023

Peloton can't seem to out-pedal its problems. The connected fitness company's latest quarterly financial report reveals that it lost 20,000 subscribers. And as Peloton struggled to address another recall, it warned investors that in the coming months, losses would grow and sales would shrink.

That news sent the stock price down as much as 24%, reaching its lowest levels ever.  

Revenue for the fourth quarter of the company’s fiscal year fell 5% to $642.1 million from $678.7 million in the comparable period last year. Sales dipped 14% compared to the previous quarter's $748.9 million.

The number of subscribers in the period dropped 5%, to 6.5 million.

And while Peloton trimmed its net loss to $241.8 million, compared to $1.26 billion the year ago, its grim forecast stole the headline: Even though the company says it began to see hardware sales start to gain about eight weeks ago, it expects subscribers and revenues to continue to decline in the coming quarter.

The higher-than-expected churn came as people shifted discretionary spending to travel and experiences.

Peloton also says that due to the recent recall of seat posts, it's been asked to replace 750,000 seats, more than expected. That added $40 million in quarterly expenses, and many members paused their subscriptions.

However, there was good news, too. In a conference call for investors, Barry McCarthy, chief executive officer, said the early indications of the recent brand relaunch have been "nothing short of amazing."

The effort promotes using the Peloton app without any connected fitness equipment, and that “'anytime, anywhere, anyplace' message is absolutely landing," especially with younger customers, McCarthy said. "We've seen a tremendous increase in engagement with Gen Z. We're capturing people earlier in their fitness journey than we ever had."

The campaign has also shifted other demographics, with more male Black and Hispanic customers downloading the app. And the app has had more than 900,000 downloads since the May 23 relaunch.

The company also says partnerships will become more prominent, including the just-announced pairing with the University of Michigan, which includes marketing, content, access, and experiences for students, alums, and athletes. Peloton is pushing into corporate wellness, offering the app as an employee perk.

It previously announced a similar deal with Liverpool FC in England, and expects more partnerships with Division 1 schools in the NCAA.

The company still has fans. "We believe there is an opportunity for a better-run, more capital-disciplined Peloton to ultimately exist and thrive within the broad fitness and wellness sectors," writes Brian Nagel, an analyst who follows Peloton for Oppenheimer. Despite the risks, he continues to rate Peloton as likely to outperform peers.

"While we do not envision a quick snapback in results at Peloton and continue to recognize meaningful cyclical and structural challenges for the company, we are increasingly of the view that under the guidance of new CEO Barry McCarthy, underlying strategic positioning and financial and operational controls of Peloton are likely strengthening."