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Peloton blew another tire. The beleaguered exercise equipment and media company's stock plunged more than 22% Wednesday after it reported a steep drop in subscribers that puts a bright spotlight on the speed of its attempted turnaround.
The company said subscribers grew 4% annually to roughly 3 million, but down 29,000 compared to last quarter. CEO Barry McCarthy said in a shareholder letter Wednesday that "consumer spending shifted toward travel and experiences" beginning in May and June, prompting people to spend less time on Peloton fitness gear.
Baby, You Can't Drive that Bike
But consumer interest hasn't been the only thing working against the company: it's still haunted by recalls of its products, which are costing more than expected. Peloton was forced to recall seat posts on its PL01 bikes following dozens of reports that the seats fell off mid-workout. In 12 cases, users were injured.
Replacing more than 750,000 seat posts has cost Peloton $40 million so far, and the company noted Peloton up to 20,000 subscribers decided to stop paying their subscriptions in the fourth quarter as they waited for repairs:
- Peloton's Q4 sales fell about 5% from a year ago to $642 million. Losses did narrow to $241.8 million but the company's cash holdings are down about one-third from a year ago.
- In an attempt to boost growth, the company started selling virtual fitness classes in May for $12-$24 a month.
Cardio Day: Peloton's Tread treadmill also was recalled in 2021 after a swath of reports that it was pulling people and pets under it and severely injuring them. Twenty-nine kids were reported injured, and one was killed. Consumer safety regulators recalled around 131,450 Tread and Tread+ units. But Peloton just got regulator approval for a new rear treadmill guard. McCarthy said he expects they'll begin reselling the product during the holidays, which could provide a much-needed cash infusion.