Peloton’s subscription pivot helped spin down losses — and spin up its struggling stock
Came for the workout… stayed for instructor Cody. Peloton shares surged 22% yesterday after the spin icon revealed healthy growth for its subscription biz — which, FYI, makes more $$ than its hardware biz ($2K spin bikes, fancy treadmills). Last quarter Peloton’s losses narrowed as cash burn fell to $94M, down from $547M a year ago. While Peloton’s hardware sales plunged 52%, subscription revenue from on-demand fitness classes grew 22%.
- Speed up: Peloton gave a better-than-expected forecast for the year and is aiming to have 1M people sign up for app subscription trials over the next year.
- Slow down: It’s Peloton’s eighth straight quarterly loss, and the stock’s down 43% in the past year. But shrinking losses and subscription growth could signal a comeback.
Just keep spinning… Peloton thrived during lockdown, but as people hopped off their couches and headed back to the gym, unsold equipment piled up. To cut its losses, Peloton outsourced manufacturing, canceled plans for a $400M Ohio plant, and laid off over a tenth of staff. Last fall Peloton pivoted from its direct-to-consumer model by striking distribution deals with Amazon and Dick’s Sporting Goods to energize demand. It also got itself into thousands of Hilton gyms, hoping to lure new customers.
The road less traveled can be smoother… Instead of giving up when its core spin-bike biz faltered, Peloton leaned into subscriptions, which are less cost-intensive than hardware. Now it’s trying to return to growth by leveraging its charismatic instructors and mobile-friendly classes. By promoting subs to non-Peloton owners, it could ride the fitness-for-all strategy to a gradual recovery.