Peloton shares fall regardless of the decline in earnings because the bike maker warns of ongoing provide shortages

Peloton reported quarterly sales growth of 232% on Thursday, exceeding the company’s expectations as consumers turned to their bikes and treadmills to exercise and stream live classes from their homes during the coronavirus pandemic.

The bicycle maker has raised its sales outlook for fiscal 2021 and now expects total sales of $ 3.9 billion or more, from $ 3.5 billion previously to $ 3.65 billion. According to a refinitive poll, analysts had asked for $ 3.63 billion. Peloton also expects this vacation quarter to be its first billion dollar quarter for revenue.

The company has been a huge beneficiary of more people staying home in 2020. However, given the increased demand for its products, Peloton struggled to keep up. Customers have reported late deliveries and poor customer service. The company announced on Thursday that it is expected to operate under delivery bottlenecks “for the foreseeable future”.

“As we rapidly scale our organization to meet the exceptional demand for our products, we are finding that some of our members have experienced lengthy delays in receiving our products or fulfilling support requests,” said John Foley, chief Executive Officer, in a letter to the shareholders.

Peloton shares fell in after-business trading and recently fell around 4% after rising more than 343% this year. The stock closed nearly 7% on Thursday.

The company reported for the first quarter of fiscal 2021 versus analyst expectations, based on an analyst survey by Refinitiv:

  • Earnings per share: 20 cents compared to 11 cents expected
  • Revenue: $ 757.9 million versus $ 748.1 million expected

Peloton anticipates profits will come under pressure as it is opening new manufacturing facilities quickly and due to the additional shipping costs incurred during the busy holiday season.

In the three months ended September 30, earnings rose from a loss of $ 49.8 million, or $ 1.29 per share last year, to $ 69.3 million, or 20 cents per share, according to Peloton. Analysts had expected Peloton to make 11 cents a share.

Revenue increased 232% from $ 228 million a year ago to $ 757.9 million, exceeding expectations of $ 748.1 million.

Peloton announced that the quarter ended with more than 1.33 million connected fitness subscribers, up 137% year over year. Affiliate Fitness Subscribers are those who pay $ 39 per month to sync their Peloton exercise classes with their Peloton devices, instead of accessing the programs separately on a phone or tablet and paying just $ 12.99.

Even during the pandemic, Peloton proves that once a new customer attracts a new customer, it tends to stick with them. It has gained a wave of new users who no longer pay to go to the gym. The average monthly net fitness churn was 0.65% in the most recent period, compared to 0.75% in the previous quarter.

The company now predicts the churn rate will stay below 0.9% in fiscal 2021, compared to an earlier forecast of below 1%. Churn for the current quarter is likely to remain below 0.85%.

Peloton also expects 1.63 million connected fitness subscribers by the end of the fiscal second quarter and 2.17 million by the end of the fiscal year. Revenue of $ 1 billion is required for the second quarter. Analysts forecast $ 939 million.

The introduction of the Peloton Bike + on September 9th, which includes more features than its original spinning bike and costs $ 2,495, “resulted in call volume and unacceptably long wait times that were far beyond our expectations,” said CEO Foley.

Peloton hopes to meet normalized delivery times for its bikes by the end of the calendar year, but waiting times for its newest Bike + “will likely be extended for the next few quarters.”

Peloton users continue to train as well. This is partly due to the fact that some households share their membership among multiple people. The company said its affiliate fitness subscribers complete an average of 20.7 monthly workouts, up from 11.7 last year.

The company also said it continues to ramp up its content production, creating more than 2,400 new classes during the quarter to ensure its members don’t get bored. New Bike Bootcamp and Barre classes were introduced during the quarter.

Peloton has a market cap of $ 36.9 billion.

The full press release can be found here.

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