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Peloton shares plunge as turnaround plan garners mixed results

By Jordan Valinsky, CNN

New York (CNN) — Peloton shares slid more than 20% Thursday after the fitness company said it expects to report another loss in the current quarter and is trimming its full-year revenue forecast, signaling that its several years-long turnaround is spinning out.

CEO Barry McCarthy wrote in a letter to investors that some of his ideas have failed, including a push into selling Peloton bikes with college colors. McCarthy revealed that the company “sold substantially fewer bikes to alumni and boosters than we expected.” The short-lived program will be discontinued.

Also in his letter, McCarthy criticized Peloton’s customer service department, called Member Support. He said the experience has “tarnished our brand” and that the busy holiday shipping season was “particularly taxing” for customers. He said the team is in the “middle of a reboot” and that customer service will improve in the coming months.

The connected fitness company adjusted its full-year revenue lower from the previous $2.7 billion to $2.8 billion expected, with Peloton now forecasting it to be between $2.68 billion and $2.75 billion.

It reported a net loss for the third quarter of 2023, and revenue for the second quarter fell 6% to $743 million, compared to the same time period a year earlier. However, that topped analysts’ estimates of $733.7 million.

Last year, Peloton completely overhauled its digital app with a new look and pricing tiers in hopes of attracting customers who thought they could only use its fitness classes with its pricey equipment. But its finance chief said Thursday that the company’s “outlook is tempered by uncertainty surrounding our ability to efficiently grow paid app subscribers and the performance of other new initiatives, as well as an uncertain macroeconomic outlook.”

It expects paid app memberships to decline 13% this quarter.

There were some bright spots. McCarthy said that selling bikes and treadmills at third-party retailers, like Dick’s Sporting Goods and Amazon, had “exceptionally strong sales growth” and its new partnership with Lululemon “outperformed our expectations.”

And a recent partnership with TikTok to create fitness videos is generating “excitement” for the Peloton brand, he said.

Peloton has endured financial struggles, layoffs and recalls in recent years. Its stock has also fallen sharply since 2020 when it was a beneficiary of the Covid-19 pandemic.

In January 2023, the company agreed to pay $19 million after the Consumer Product Safety Commission levied “one of the largest civil penalties in its history,” the agency said, following a recall of 125,000 unsafe Peloton treadmills.

The company announced a “new chapter” last May, pushing a more inclusive brand identity with a wider range of fitness options, more free classes, tiered memberships and an emphasis away from biking.

McCarthy was named CEO two years ago this month.

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