The home workout trend shows no signs of stopping, with Peloton Interactive (PTON 4.75%) reporting fiscal first-quarter sales that rose 232% from last year, though demand for its new, lower-cost exercise equipment is proving to be too much to meet.

The home fitness guru said customers are experiencing "unacceptable" delays in receiving the equipment, and it's going to require profit margins to contract in the second quarter to clear it up.

Woman on an exercise bike

Image source: Peloton Interactive.

Cycling through a growth spurt

Too much demand could be a good problem to have, though it can create customer dissatisfaction and undermine short-term performance.

In its earnings release after market close on Thursday, Peloton said revenue more than tripled to $758 million, and it ended the quarter with 1.33 million connected fitness subscribers, up 137% year over year. The number of workouts that subscribers used quadrupled to over 77 million, maintaining the brutal pace set last quarter, when they rose 333%.

The strategy to create a better-best pricing scenario for its fitness equipment is proving successful. And it comes at just the right time, with gyms being forced to remain closed, helping to lift consumer demand for its products.

Yet it is also causing headaches because Peloton is falling behind in fulfilling orders. Although it's adding new manufacturing capacity and improving logistics and customer support, the company says it "will be operating under supply constraints for the foreseeable future." It believes the situation will exist for several quarters to come.

That's a notable change in language from the fiscal fourth quarter, when it expected the backlog to clear out by the end of the second quarter.

Peloton, though, expects full-year gross margins of 41%, only slightly below the mid-40% range it has been enjoying.