Investors see ‘existential threats’ to fitness company that saw popularity during early months of Covid pandemic

Peloton recorded losses of more than $1.2bn in the past three months, the company announced on Thursday, frustrating investors looking for progress in the company’s efforts to revive sagging sales of its fitness equipment.

The news sparked another selloff for the company’s shares as one analyst foresaw mounting “existential” threats to the company’s survival. Shares tumbled more than 19% to $10.88 in morning trade, adding to an 88% drop over the year.

Peloton’s exercise bikes, which are priced at above $1,400, treadmills and connected classes were all the rage among fitness enthusiasts during Covid lockdowns. The company hit a peak market valuation of nearly $50bn in early 2021, while revenue more than doubled. On Thursday, Peloton was valued at just over $3.6bn.

Demand nosedived as gyms reopened following vaccinations, forcing the company to rejig its top management. Chief executive Barry McCarthy, a former Spotify and Netflix executive, has rolled out measures to cut costs through layoffs, store closures and outsourcing manufacturing, as well as reduce inventories since taking over in February.

In his latest effort, Peloton on Wednesday said it would start selling its fitness equipment on e-commerce giant Amazon in the United States, fueling a 20% jump in shares.

The restructuring resulted in $415m in charges and bloated its operating expense in the fourth quarter, leading to a net loss of $1.24bn.

“The naysayers will look at our fourth-quarter financial performance and see a melting pot of declining revenue, negative gross margin, and deeper operating losses,” McCarthy said in a letter to shareholders. “But what I see is significant progress driving our comeback and Peloton‘s long-term resilience.”

In his letter, McCarthy noted that as a high school student he had worked on a cargo ship that had run into trouble. The crew managed a dramatic recovery.

“Peloton is like that cargo ship,” he said. “We’ve sounded the alarm for general quarters. Everyone’s at their station.”

The company, which in May warned of a cash-crunch, expects first-quarter sales to be in the range of $625m to $650m, below estimates of $783.28m, according to Refinitiv Ibes data.

“Given its level of cash, inventory, and cash burn, we view existential threats on Peloton as rising,” said MKM Partners analyst Rohit Kulkarni.

Reuters contributed to this story