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Feb 4, 2021

Peloton can’t keep up with demand; profit to be squeezed

COVID-19 has been a tailwind for us: Peloton president

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Peloton Interactive Inc. said it can’t keep up with surging demand for the company’s connected exercise machines and warned that profit will be squeezed as it tries to fix the problem. The shares fell about 5 per cent in extended trading.

“West Coast port delays and Covid-related factors continue to present challenges to returning our delivery times to pre-pandemic levels,” the New York-based fitness company said Thursday in its quarterly earnings statement.

Supply remains constrained for both Peloton bike models, with “longer than acceptable wait times,” it added. The company is investing more than US$100 million in air and expedited ocean-based delivery over the next six months to improve the situation.

“While this investment will dampen our near-term profitability, improving our Member experience is our first priority,” the company said.

Peloton sales have soared in the past year as the pandemic shut gyms and forced people to work out from home. However, the company has struggled to keep up with demand for months, leading to long wait times and frustrated customers.

For the current period, Peloton forecast revenue of US$1.1 billion. Analysts were looking for US$1.09 billion. The company also raised its sales forecast for the full fiscal year to US$4.08 billion, up from US$3.90 billion previously. Wall Street estimated US$3.95 billion, according to data compiled by Bloomberg.

“Our revised forecast anticipates slow but steady progress in narrowing our order-to-delivery windows over the remainder of the fiscal year,” the company said.

In the quarter ending Dec. 31, revenue grew 128 per cent from a year earlier to US$1.06 billion, the first time quarterly sales have topped US$1 billion. Analysts were looking for US$1.03 billion. Net income was US$63.6 million, or 18 cents a share, up from a US$55.4 million loss a year ago.

Connected fitness subscriptions -- users who pay for classes on Peloton equipment -- jumped 134 per cent to 1.67 million. Paid digital subscriptions -- people who subscribe to classes on smartphones and other devices, soared 472 per cent to about 625,000. The company said it now has more than 4.4 million users.