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Peloton’s shares fall by 20% amid growing losses and slow sales

Peloton’s shares fall by 20% amid growing losses and slow sales

The share price of exercise equipment maker, Peloton Interactive, Inc., has reportedly fallen by 20% in early trading, as the company recorded a higher quarterly loss than anticipated, along with cut sales guidance and missed revenue targets.

Peloton’s market value has already sunk by over 80% over the last year.

The firm posted $964 million in revenues for the third fiscal quarter, down from $1.26 billion in the same period last year as the home workout trend slowly dies down with easing COVID-19 lockdown restrictions.

Peloton, which missed the analyst revenue estimate of $971.6 million, also reported a $757 million loss.

In a letter to shareholders, Barry McCarthy, CEO of Peloton, wrote that turning around the company has proven to be emotionally draining, physically exhausting, and intellectually challenging.

McCarthy, who took over after co-founder John Foley left in February, stated that managing inventory has been a major challenge for the balance sheet.

He explained that the firm’s inventory, which took up a larger amount of cash than expected, is more than what is needed for the current run rate of its business, causing it to reconsider its capital structure.

However, McCarthy also stated that the obsolescence risk on this will be negligible and also believes that they will be able to sell the inventory eventually, adding that instead of being a structural issue, it is a cash flow timing issue.

Peloton, which offers internet-connected bicycles and treadmills, claimed that it forecasts $675-$700 million in revenue for the fourth quarter this year, having seen a softer demand as compared to its previous guidance, along with recent price reductions in hardware.

The firm has also signed a deal to borrow $750 million with Goldman Sachs and JP Morgan Chase in five-year term debt.

While reports have suggested that Peloton may be looking to sell as much as a 20% stake of its businesses to an outside investor to further advance its turnaround strategy, the firm has said that it is not looking to sell.

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Meghna Singh

An English Literature graduate, Meghna Singh ventured into the profession of content development to incorporate her knack for writing articles across verticals including technology, healthcare, business, and alike for News Origins and Newsorigins. She has also completed her MBA in Tourism and worked as a content creator in the field of product development.