Peloton’s bike wait time back to pre-COVID-19 levels

Peloton issuing recall on treadmills may impact demand: BMO managing director

BMO Capital Markets managing director Simeon Siegel discusses the impact of Peloton’s treadmill recall.

Peloton's delivery wait times for its Bike product have returned to pre-COVID-19 levels after the company made significant investments in the third quarter to expand its supply chain capabilities.

HOW PELOTON'S TREADMILL RECALL MAY IMPACT FUTURE DEMAND, CONSUMER TRUST

The company reported revenue growth of $1.26 billion in the quarter, up 141%, driven by strong demand for its Connected Fitness Products, the acceleration of deliveries and low churn levels. 

Connected Fitness segment revenue was $1.02 billion, representing 140% year-over-year growth and 81% of total revenue. Subscription revenue grew to $239.4 million, representing 144% year-over-year.

Peloton narrowed its losses to $8.6 million, or 3 cents per share, compared to $55.6 million, or 20 cents per share, a year ago.

PELOTON'S SECURITY GLITCH POTENTIALLY EXPOSED SENSITIVE MEMBER DATA

The company ended the quarter with 2.08 million Connected Fitness subscriptions, up 135% year-over-year. Connected fitness subscribers are people who own a Peloton product and also pay a monthly fee for access to the company’s digital workout content. 

Digital subscriptions – sans equipment – surged 404% to 891,000.

Within the Connected subscriptions, Peloton saw its members tap into 149.5 million works – an all-time high – and an increase of 239% over a year ago. 

The pandemic certainly aided the uptick in workout usage. Last year Peloton members averaged 17.7 workouts compared to 26 this year. Also, the company saw its lowest amount of customer turnover ever with its churn rate hitting a record low of 0.31% 

Peloton has been adding new content, such as barre and Pilates classes, in an effort to keep its customers engaged. In addition, the company is preparing to expand its offerings to Australia later this year.

"While progress has been made, additional work remains to reduce delivery times across the remainder of our product portfolio and regions," Chief Executive John Foley said in a letter to shareholders Thursday

Peloton recently closed its $420 million acquisition of equipment manufacturer Precor. Peloton plans to begin limited manufacturing at Precor's North Carolina facility by the end of 2021, with a goal to ramp up production further in 2022. 

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The earnings announcement comes a day after Peloton issued a voluntary recall for its Tread+ machine following reports of a child's death and dozens of injuries. 

U.S. Consumer Product Safety Commission urged consumers who have purchased either treadmill to immediately stop using it and contact Peloton for a full refund. The recall warns that adults, children, pets and objects are at risk of being pulled underneath the back of the treadmill "posing a risk of injury or death." 

Peloton initially pushed back after the consumer watchdog agency issued its warning. However, Foley later apologized as the company officially issued its recall, which impacts about 125,000 Tread+ machines and roughly 1,050 Tread products in the U.S. 

"I want to be clear, Peloton made a mistake in our initial response to the Consumer Product Safety Commission’s request that we recall the Tread+," Foley said. "We should have engaged more productively with them from the outset. For that, I apologize."

TickerSecurityLastChangeChange %
PTONPELOTON INTERACTIVE, INC.83.78+1.16+1.40%

Shares fell more than 4% in after-hours trading following the earnings announcement. 

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