Peloton Posts Profit, with a Supply Crunch
November 8, 2020 Topic: Economics Region: Americas Blog Brand: Techland Tags: PelotonProfitSupply And DemandShortagePeloton Bike

Peloton Posts Profit, with a Supply Crunch

The company has been so successful, in fact, that there have been delays in the delivery of some products.

Bike maker Peloton, in quarterly earnings released this week, posted a profit of $69.3 million, based on sales that surged 232 percent over the year before, with their 20 cents earnings per share nearly doubling estimates from analysts, per CNBC.

As the coronavirus pandemic continued to keep people indoors and kept some gyms closed or restricted, Peloton continued to take advantage, with Connected Fitness Subscriptions growing 137 percent to 133 million Digital Subscriptions jumping 382 percent, to more than 510.000. There are also now 3.6 million Peloton members.

The company has been so successful, in fact, that there have been delays in the delivery of some products, as well as delays in tech support call volumes, for which Peloton apologized.

“We will continue to work diligently to address delivery and support issues, as we have long prided ourselves on providing superior customer service. With an understanding of what is required to return to our normal standards, we continue to invest in technology, manufacturing capabilities, and people to help us scale and meet the needs of all our customers,” the company said in its shareholders letter.

In the quarter, Peloton announced both the new Bike+ and its new Tread treadmill, while also cutting the prices of its older products. The new Tread is set to launch in early 2021.

Despite the good news, per CNBC, the company’s shares slumped after the earnings announcement, on the concerns raised by supply constraints. They did gain back ground on Friday, however.

“We see Peloton increasingly capitalizing from a secular shift in consumer behavior amid extended social distancing, with elevated demand we're seeing for at-home fitness (longer order to delivery for ‘couple more quarters’) and reflected in sustained low churn levels (0.65 percent vs. 0.90 percent year ago),” analyst Camilla Yanushevsky wrote in a note to clients, as cited by Yahoo Finance. “With over $2 billion of liquidity, we believe Peloton has significant resources to continue investing in product and platform to drive growth.”

“As we’ve said previously, our goal is to become the leading connected fitness and wellness platform. In order to do that we have focused on complementing our incredibly effective and immersive cardio offering with world-class strength and wellness content. We are continuously investing in hardware, software, and content to maintain our leadership position,” the company added in the investor letter.

On the lighter side, Peloton banned all hashtags associated with the QAnon conspiracy theory, and a company called Echelon this fall introduced a new bike it called “The Prime Bike” that it claimed was developed in collaboration with Amazon, leading the tech press to speculate that Amazon was making a move into direct competition with Peloton. However, Amazon later distanced themselves from the product.

Stephen Silver, a technology writer for The National Interest, is a journalist, essayist and film critic, who is also a contributor to Philly Voice, Philadelphia Weekly, the Jewish Telegraphic Agency, Living Life Fearless, Backstage magazine, Broad Street Review and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. Follow him on Twitter at @StephenSilver.

Image: Reuters