Peloton Cuts Forecast Due to Treadmill Recall

Peloton’s lowered expectations come after a year in which the company continually raised its forecasts as the pandemic fueled astronomical growth.

“We’re going to take some short-term financial pain to be able to invest in building something that will last for decades,” Peloton Chief Executive

John Foley

said on a call with analysts Thursday.

Federal safety regulators last month said Peloton’s Tread+ is unsafe in homes with children and pets and urged a recall of the machine. The company initially rebuffed the request from the U.S. Consumer Product Safety Commission, arguing that the machine is no more dangerous than other treadmills, before agreeing to the recall this week. A smaller treadmill that has yet to go on sale to the U.S. public is being recalled due to issues with its console. .

Peloton is primarily known for its stationary bikes and connected-fitness classes, though treadmills are a significant contributor to the company’s profit. The Tread+ costs $4,300.

The recall will cost Peloton lost sales as well as lost revenue from subscription fees for classes, which the company offered to waive for three months for Tread+ owners. It also faces the expense of returns and, for owners who request it, relocating machines to child-safe rooms.

The CPSC said the fact that the Tread+ features a belt made of individual slats rather than a continuous band, that it sits higher than a typical treadmill and that it lacks a rear guard appears to make the machine riskier than an average treadmill.

Treadmills account for about 12% of the company’s equipment revenue going back to 2018, when the machines first went on sale, BMO analyst Simeon Siegel said in a research note.

That figure doesn’t include subscriptions to interactive classes, which represent about 20% of Peloton’s overall sales.

Peloton said sales more than doubled in the most recent quarter as wait times for some of the company’s connected exercise bikes returned to pre-pandemic levels.

The company earlier this year started shipping exercise equipment by air and delayed the launch of a much-anticipated new treadmill as it sought to remedy extreme delivery delays.

Chief Executive John Foley on Wednesday apologized for the company’s initial refusal to comply with federal safety regulators who said the machines are unsafe in homes with children or pets and pushed for a recall. He apologized again during a Thursday call with analysts.

Revenue for the quarter rose to $1.26 billion, up from $524.6 million a year earlier, as demand for remote workout classes and at-home fitness gear continues to surge during the pandemic. Peloton swung to a loss following three consecutive quarters of posting a profit.

Peloton said the number of people subscribing to its remote fitness classes reached 2.08 million in the quarter ended March 31, an indicator of demand for its stationary bicycles and treadmills. The tally stood at 1.67 million at the end of December.

Peloton reported a loss of $8.6 million, compared with a $55.6 million loss a year ago.

Write to Sharon Terlep at [email protected]