May 7, 2020

‘Covid-proof’ Peloton enjoys stay-at-home fitness boom


As other companies scrap their earnings guidance in the wake of the coronavirus pandemic, the fitness group Peloton on Wednesday increased its forecasts, telling investors that lockdown orders had prompted hordes of people to exercise at home on the internet-connected bikes it pioneered.

Chief executive John Foley described its streamed fitness classes business as “Covid-proof” and “recession-proof”, as Peloton reported revenues up two-thirds in the quarter ended March 31.

Its shares powered 10 per cent higher in after-hours trading to a new record over $42 — more than double the price in mid-March and well above the $29 at which Peloton sold shares in its initial public offering in September last year.

The marketing-heavy group’s net loss widened in the quarter to $55.6m from $38.6m a year ago, and it said it was currently experiencing difficulties delivering physical equipment to new customers.

But revenues of $524.6m beat estimates of $488m, as Peloton’s total number of fitness subscribers almost doubled to 886,000.

“The shelter in place and work from home realities have created a meaningful tailwind for Peloton,” Mr Foley said.

He said that in the past six weeks alone more than 1.1m people had downloaded the Peloton Digital app, which offered a 90-day trial of home workouts that did not require the $2,245 Peloton bike or its $4,295 treadmill.

The company now expects full-year revenues for the 12 months ending June to rise about 89 per cent to $1.72bn-$1.74bn, up from $1.53bn-$1.55bn previously. It also expects up to 1.05m connected subscribers by the end of this year, more than double a year ago.

The New York-based group is struggling to respond to “unexpected” orders for equipment, leading to an “imbalance of supply and demand” and longer delivery times, said chief financial officer Jill Woodworth.

Demand in all markets spiked in the first week of March and had continued into May, creating a major challenge to fulfil orders, she said.

“While we are working to accelerate the supply side and incurring higher costs in order to expedite shipments, we do not expect to materially improve ‘order to delivery’ windows” in the next few weeks, Ms Woodworth said.

As Peloton strives to keep growing, it also faces increasing competition from new start-ups and legacy fitness companies.

Hydrow, a connected rower with a 22-inch monitor, said its sales last month were four times higher than in January, typically the peak month when consumers are thinking about new year’s resolutions.

“We certainly didn’t plan for every gym to be closed in the USA, but clearly the adoption curve for Hydrow has been accelerated radically,” said Bruce Smith, its chief executive.

Icon Health and Fitness, a private company with $1.2bn in annual sales that owns NordicTrack, Freemotion and other brands, said its sales were up 600 per cent year-to-date until the end of April, though it declined to give unit sales.

Colleen Logan, vice-president of marketing at Icon, said what differentiated Icon from Peloton was a broader portfolio of hardware products, ranging from a $400 bike to a $4,000 treadmill.

Peloton’s Mr Foley said six years of triple-digit percentage growth in subscriber numbers signalled an attractive business with or without a global pandemic.

“We believe Peloton is the future of fitness independent of when we get back to normal,” he told analysts on a conference call.



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