Pandemic darling Peloton's stocks have plummeted nearly 90 percent over the past year, as company executives revealed on Tuesday that it lost a staggering $750 million in the last quarter due to unsold inventory and mounting costs.
The company lost $757.1 million for the three months of 2022, amounting to about $2.27 per share. And when stripping out nonrecurring items from the equation, a survey by Zacks Investment Research, it lost 98 cents per share - outpacing projections of a per-share loss of 85 cents.
That loss is far greater than last year when the company was already $8.6 million in debt, as revenue slid 15 percent to $964.3 million, which was also short of analyst projections.
According to the report, Peloton Interactive Inc. now has just $879 million in cash on hand, which, CEO Barry McCarthy told shareholders, 'leaves us thinly capitalized for a business of our scale.'
He announced that the company now has a 'binding commitment' with JP Morgan and Goldman Sachs to borrow $750 million.
But that did little to assuage analysts, as shares for the popular exercise equipment were trading at just $11.78 Tuesday afternoon - a decrease of more than 86 percent from last year, when its shares sold for as much as $171.
Now, many are wondering how the company will be able to bounce back as people ditch their pandemic-era workout routines and following a year of bad press.
Peloton has continued to lose money as more people ditch their pandemic-era workout routines as stay-at-home orders are lifted around the world
As of Tuesday afternoon, shares of the exercise equipment company were trading at just $11.78 - down nearly 90 percent from last year
The maker of high-end exercise bikes and treadmills thrived during COVID-19 outbreaks and sales growth for the New York City company doubled in 2020 and surged 120 percent in its last fiscal year.
But as COVID vaccines became more readily available, and stay-at-home orders were lifted throughout the world, people are once again finding other workout options.
In February, the company announced a major restructuring and abandoned plans to open its first U.S. factory, which would have employed 2,000 workers in Ohio.
Co-founder John Foley also stepped down as CEO at the time and the company said it would cut nearly 3,000 jobs.
The company also cut the prices of its treadmills and bikes at the time, prompting daily revenue to increase 69 percent, CNN reports.
Still, the company continued to struggle, adding just 195,000 new subscribers in the last quarter, less than half of what it was adding a year ago - as company executives say it would see sales of about $700 million this quarter, way below what investors had expected.
They now find themselves wondering how the company will move forward.
'After a couple of years of adoration, Peloton now finds itself in the unenviable position of having to justify its business model is both relevant and operationally sound in a post-pandemic era,' said Neil Saunders, managing director of GlobalData.
'Quite frankly, the jury is still out on both counts - but today´s results do nothing to make investors lean towards a favorable verdict.'
The company lost $757.1 million, or $2.27 per share, for the three months of 2022, amounting to about $2.27 per share as its revenue slid 15 percent to $964.3 million
Still, new CEO Barry McCarthy presented a few ideas in a letter to shareholders.
He said the company needs to rethink its capital structure at the same time that it pushes to expand its subscriber base to 100 million.
His letter to investors on Tuesday emphasized the company’s push to focus more on the digital app and less on sales of bikes and treadmills.
CEO Barry McCarthy said the company now needs to rethink its capital structure as it pushes to expand its subscriber base
Among the strategies he suggested was having the company roll out a test in which customers can pay a flat rate to rent one of Peloton's stationary bikes, and get access to on-demand workout classes.
And, he wrote, the company is also looking to broaden its distribution by selling Peloton through other retailers.
'Turnarounds are hard work,' McCarthy said in the letter to shareholders.
'It’s intellectually challenging, emotionally draining, physically exhausting, and all consuming. It’s a full contact sport.'
Each of these strategies would mean that the company would spend more to get new customers, rather than focusing on selling the stationary bikes, according to UBS analyst Arpiné Kocharyan.
But after spending $747 million in the last quarter, Kocharyan believes that will lead to heightened concern about the cash Peloton has to work with.
Neil Saunders also said that Peloton faces a tough battle in improving its app, as companies like Apple invest extensively in their own fitness solutions and big brands like Lululemon are pivoting more toward classes and services.
'It is reasonable to assume that costs can be cut further, but even with these future savings, Peloton would still be, at best, a low-profit company that delivers a poor return,' he wrote in a note to investors.
The company has faced a difficult year, with the Consumer Product Safety Commission announcing a recall of its Tread+ treadmills and sharing a video of a young boy being pulled under the treadmill. Luckily, he walks away from his encounter with the device
The news comes following a difficult year for the exercise giant.
Last March, news broke that a six-year-old child was sucked under one of the company's Tread+ machines and died of their injuries.
The company refused to recall the products at the time, but told members: 'In order to help ensure that you and your family members stay safe with Peloton products in your home, we need your help.
'To prevent accidents, please take care to review and follow all the safety warnings and instructions that we provide, and always: Keep children and pets away from Peloton exercise equipment at all times.
'Before you begin a workout, double check to make sure that the space around your Peloton exercise equipment is clear.'
But as more injury reports came out in the following weeks, federal regulators with the U.S. Consumer Product Safety Commission urged people with children and pets to immediately stop using the Peloton Tread+.
They reported that 29 other children were hurt after being sucked under the machines, with injuries including broken bones and cuts.
Still, Peloton fought the federal safety recall and allegedly delayed an investigation into the potential safety problems.
It finally agreed in May to the recall of about 125,000 of its Tread+ treadmills, which would cost the company some $165 million.
Then-CEO John Foley later admitted on Good Morning America that it was a mistake not to recall their treadmills earlier.
'We did make a mistake by not engaging earlier in the process,' he said, claiming the 'most important thing is the safety of our members'.
The company also faced problems in December when Chris Noth's character, Mr Big, died of a heart attack after using a Peloton bike
The company again found itself under hot water several months later when a beloved character on the Sex and the City reboot 'And Just Like That...' suffered from a heart attack and died after using one of their machines.
The sudden death of main character Carrie Bradshaw's husband, Mr. Big (played by Chris Noth) shocked fans and caused an uproar on social media.
In a statement afterwards Dr. Suzanne Steinbaum, an attending cardiologist serving on the company's Health and Wellness Advisory Council claimed that it was likely Mr. Big's grandiose lifestyle that caused his death - and not his use of the machine.
'I'm sure SATC fans, like me, are saddened by the news that Mr. Big dies of a heart attack,' Steinbaum began in her statement to US Weekly.
'Mr. Big lived what many would call an extravagant lifestyle — including cocktails, cigars, and big steaks — and was at serious risk as he had a previous cardiac event in Season 6,' she continued.
'These lifestyle choices and perhaps even his family history, which often is a significant factor, were the likely cause of his death. Riding his Peloton bike may have even helped delay his cardiac event,' she added.
Steinbaum also revealed that, 'more than 80 percent of all cardiac-related deaths are preventable' by changing one's lifestyle, diet and exercise.
'While 25 percent of heart attacks each year are in patients who already had one (like Mr. Big), even then they are very, very treatable,' she continued.
'It's always important to talk to your doctor, get tested, and have a healthy prevention strategy. The good news is Peloton helps you track heart rate while you ride, so you can do it safely,' she said.
Peloton later released its own commercial of Mr. Big alive and drinking wine in front of two Peloton bikes. They later had to delete the commercial after sexual assault allegations were lobbed against Noth
To get back at the show, Peloton later released a new ad opening up on a fireplace before zooming out to reveal Chris Noth, as Mr. Big sitting next to real-life Peloton instructor Jess King - who played Big's trainer Allegra in the show - on a couch and drinking wine.
'To new beginnings,' he toasts the Peloton instructor, who replies the same way, before telling him: 'You look great.'
'I feel great,' Mr. Big says, before pointing to the corner with his eyes and asking King: 'Do you want to take another ride? Life's too short not too.'
The couple then laughs, as the frame expands to show two Peloton Bikes behind them, as actor Ryan Reynolds does a voiceover, saying: 'And just like that... the world was reminded that regular cycling stimulates and improves your heart, lungs and circulation, thus reducing your risk for cardiovascular diseases.
'Cycling strengthens your heart muscles, lowers your pulse and reduces blood fat levels,' he continues, before simply saying: 'He's alive.'
But just days later, the company deleted the viral commercial after sexual assault allegations arose against Chris Noth.
Noth, 67, has vehemently denied the claims against him after two unnamed women told The Hollywood Reporter that the married father-of-two sexually abused them.
A third accuser, actress Zoe Lister-Jones, also came forward claiming that he was 'sexually inappropriate' to women who worked at a New York City club he owned, and sniffed her neck while drunk on set of Law and Order.
Since then a National Enquirer story from the 1990s has gained renewed attention for its claims by model Beverly Johnson that Noth had attacked her and threatened to kill her while they were dating in the 1990s.
In statement, Peloton confirmed to DailyMail.com: 'Every single sexual assault accusation must be taken seriously.
'We were unaware of these allegations when we featured Chris Noth in our response to HBO's reboot. As we seek to learn more, we have stopped promoting this video and archived related social posts.'