Peloton shares reported a greater than expected quarterly loss. In addition, a steep decline in sales got observed. At the same time, inventory piled up in warehouses and took away the company’s cash.
The connected fitness equipment maker also offered a weak sales outlook for the fiscal fourth quarter.
The company claims that planned subscription price hikes may lead users to cancel their monthly memberships.
Peloton shares closed down nearly 9% at $12.90. This is a new low for the stock.
Peloton’s excess inventory made the company worry about its capital structure.
Chief Executive Officer Barry McCarthy stated that Peloton finished the quarter lowly with $879 million in unrestricted cash.
The company earlier signed a binding commitment letter with JPMorgan and Goldman Sachs. This is to borrow $750 million in five-year term debt.
The two banks led Peloton’s IPO in 2019.
McCarthy is confident that the company can return to free cash flow positively by fiscal 2023.
Expanding subscription revenue is prime in McCarthy’s strategy.
He said that Peloton would soon sell its products through a third-party retailer.
Peloton’s losses widened in the fiscal third quarter to $757.1 million. This is around $2.27 per share from a net loss of $8.6 million a year earlier. Revenue dropped to $964.3 million from $1.26 billion a year earlier.
The major cause of the drop was a steep reduction in consumer demand. However, Peloton also noticed that it faced higher than expected returns for its Tread+ machine.
The disappointing fact for investors was Peloton’s bleak outlook for its current quarter. McCarthy noted in his letter to shareholders, “turnaround is hard work.” However, he stated that Peloton’s free cash flow should become “meaningfully better” in the fiscal fourth quarter.
Peloton is looking for the fourth-quarter revenue to be between $675 million and $700 million. In addition, McCarthy said Peloton would seek to raise awareness around its digital app. This will allow people to pay for access to the company’s workout content without owning a Bike or Tread.