Peloton Is Broken

Peloton Interactive Inc. (NASDAQ: PTON), the company, has been broken for a while. To make matters worse, the seat on its entry-level bike is broken and some customers have been injured. Since the company can barely hang on as a public corporation, one has to ask how long these problems can go on. Management has bungled every chance it has had to turn the Peloton around. (Customers are abandoning these 25 brands.)

According to Bloomberg, the defective seat problem was buried in an SEC filing. It came the same day as earnings and a collapse in the share price. Shares dropped 14% to $7.64 apiece. The stock has fallen 55%, all on the inadequate watch of Barry McCarthy, CEO and president, who shockingly wrote, “Last quarter I described our performance as the best in my twelve months with Peloton. Our Q3 performance was even better.” It is a wonder the board has kept him.

Peloton’s members shrank from 7.0 million a year ago to 6.7 million in the most recent quarter. Total revenue collapsed 22% to $749 million. Peloton lost $276 million, compared to a $757 million loss in the same period the year before. The company has $874 million in cash.

Peloton has thrown everything it can into its revenue problem. This includes a deal to put its bikes in Hilton locations, the sale of used versions of its products and a deal with Dick’s Sporting Goods to sell its products. Each of these is an example of how its sales channels compete with the sale of new products, likely the ones on which Peloton makes the most money.

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The reason most often given for the failure of Peloton is that people who bought the bikes during the pandemic have moved back to exercising in gyms. That may not be the primary reason at all. Customers can find plenty of less expensive alternatives. A look at Amazon’s “exercise bike” section tells the whole story.

Eventually, Peloton, the company, will go away. People and companies with used equipment will be all that is left.

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