Tech Bike Co Peloton Shares Plunge, New Treadmill Coming Despite Previous Death
Tech bike Company Peloton Interactive, has seen their shares plunge 24%. after another round of poor results with serious questions raised about the future of the brand that is set to bring back a new treadmill, despite a previous models being responsible for the death of a girl in the USA.
The US business has been forced to trim its full-year revenue forecast as management struggle to turn around a business that is riddled with problems with the business now punting on the reintroduction of a treadmill to their range.
Back in March 2021, Peloton learned that a six-year-old died after becoming entrapped in one of their treadmills.
A day later, Peloton informed the commission of the incident, but there had already been 150 reports of the product’s defect by that point.
Peloton subsequently agreed to voluntarily recall the product in April 2021.
The Company agreed to pay $16,025,000 for not reporting the incidents in a timely manner, and $3,040,000 for the charge of distributing recalled products.
The fine totals $19,065,000 or A$28 million,
The settlement agreement required Pelton to maintain a program to ensure compliance with CPSC regulations.
Overnight Peloton stock fell to a low of $4.17, down 24%.
The company now expects full-year 2024 revenue to be between US$2.68 billion $2.75 billion, down from its previous forecast of between $2.70 billion and $2.80 billion.
“In lowering its guidance, Peloton is acknowledging that the pivot from a hardware-focused business to a subscription-based model is rocky,” said Zak Stambor, senior analyst, retail & ecommerce, at research firm Insider Intelligence.
The company ended with 3 million connected-fitness subscribers in the second quarter, an about 1% increase from a year earlier and above FactSet estimates of 2.99 million.
In Australia the brand is pushing to sign up subscribers to their products.
“While it delivered better-than-expected gains in paid connected fitness subscribers, there are plenty of potential speed bumps ahead,” Stambor said.
Peloton are punting on a boost from the reintroduction of the high-end Tread+ priced at $9,500 two years after sales were temporarily halted due to safety concerns.
“While our paid subscriptions for connected fitness outperformed our expectations, our hardware sales were a bit softer than we expected,” Chief Financial Officer Elizabeth Coddington said on a call with analysts.
Demand for its equipment was lower than expected as inflation-weary customers pulled back on spending during the holiday season, typically its strongest for hardware sales.
Revenue in the last quarter fell 6.2% to $743.6 million but beat analysts’ expectations of $733.5 million, according to LSEG data.
The company said it expects third-quarter revenue to come in between $700 million and $725 million, below analysts’ estimates of $753.8 million.