Leader in economic information of the sport Peloton: brief history of the broken doll of 'home fitness'
Peloton, carrier of the platoon. The American company specializing in the manufacture and sale of stationary bicycles for the practice of home fitness has gone from being the star of the moment, the preferred brand of the President of the United States, Joe Biden, and one of the preferred brands of Americans to paralyze its production and deflate on the stock market, where it has accumulated a drop of more than 20% since January
Due to the decrease in demand with the return to normality, the company has bottomed out in recent days and, Blackwells Capital, an activist investor in the company, has called for the removal of John Foley as CEO, and has considered that Peloton may be an attractive acquisition target for larger technology or fitness-oriented companies. In fact, there are some rumors that suggest that Apple could be an interesting option.
Peloton's difficult moment is also reflected on the stock market, since in the last 52 weeks, the company's share value has gone from $166.57 to trading below its IPO price of September 2019, which was $29. Because of this blow, the company has fallen from the Nasdaq 100 index.
Peloton has gone from trading at $166.57 to below its September 2019 IPO price of $29.
Although it had been running out of steam for months, the latest results confirmed the worst forecasts. Peloton closed the first quarter of the current fiscal year (period ending in September) with a 6.3% increase in sales and a loss of 376 million dollars.
For the second quarter, the company anticipates that it will have a revenue of 1,138 million dollars, against between 1,100 million dollars and 1,200 million dollars expected, reason why it has paralyzed its production of bicycles until at least March. The company attributes the decision to increased competition and rising prices. Additionally, it does not anticipate producing any Tread+ machines in the current fiscal year, which ends June 30, 2022.
On the other hand, Peloton increased the price on some models, charging customers a $250 shipping and setup fee on some of its bike models and a $350 shipping and setup fee for some of its treadmills. In addition, the company has hired consulting firm McKinsey to review its cost structure and cut jobs.
Peloton struggled for several months with delivery problems due to a broken supply chain and suffered several incidents that damaged its brand image, such as the death of a child related to the Tread+ tape.
Peloton has hired the consulting firm McKinsey to review its cost structure and eliminate jobs
As icing on the cake to its repeated blows to its brand image and its successive crises, the company on Sunday expressed its disgust with the television channels HBO and Showtime after the characters of two of its series had a heart attack while they were exercising on their stationary bikes "We understand why those TV shows want to include a brand that everyone talks about, but we don't agree with Showtime's use of Bike+," the company wrote on Twitter after the broadcast of the latest episode of Billions, this Sunday on the Showtime channel.
But Peloton has always been on everyone's lips, since its first round in 2015. The company was founded in 2012 in New York by businessman John Foley, specializing in high-end exercise bikes, which featured a screen where the user could see in real time or on demand videos of directed classes.
The company's business grew until in 2015, when it had already multiplied its business by five, it managed to capture more than 120 million euros. First, True Venture and Tiger Global Management led a round of thirty million dollars and then the L Catterton fund, created by the luxury group LVMH, injected another 75 million dollars into its commitment to cycling, just before buying the high-end Italian Pinarello.
Peloton gave entry to L Catterton in its capital in 2015, receiving an injection of 75 million
After continuing to triple revenue and subscribers, in 2017, Peloton raised 325 million dollars in a round led by the funds Wellington Management, Fidelity Investments, Kleiner Perkins, and True Ventures and in which Comcast NBCUniversal, GGV Capital and QuestMark also participated, some with experience in home fitness.
A year later, with Europe on the horizon, Peloton closed another round of financing of 550 million dollars, reaching a valuation of 4,000 million dollars, in which the TCV fund entered, whose subsidiaries also include Netflix, Spotify and Facebook. The objective of this round was to open its business, first in Canada and then in the United Kingdom, after having consolidated in the United States.
Finally, in the year before the pandemic, the company announced that it was preparing its debut on the floor, and commissioned its IPO to funds Goldman Sachs and JPMorgan. The company was valued at $8 billion. On September 27, 2019, it debuted on the floor with a decrease of 11%. The company started trading at 29 euros per share, so its total valuation was 8.2 billion dollars.
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Along these lines, in 2019, the company opened its first store in Europe in London and announced an investment of fifty million pounds to grow in Europe, announcing its landing in Germany. In that course, Peloton already registered sales of 915 million dollars in the fiscal year that ended in June 2019, an amount that doubles that of the previous year and that quadruples that of 2017. Despite the good pace of sales volume, Peloton shot its red numbers in the year before Covid-19, tripling its losses in 2019, to 195.6 million dollars.
Peloton went public in 2019, with a valuation of $8.2 billion.
And the pandemic came. And Peloton exploded with success. In 2020, the company's stock market value quintupled to $42 billion, reaching record highs after the purchase of Precor on December 22 of that course for $420 million.
The operation allowed Peloton to increase its production capacity after a year in which the home fitness boom triggered the company's business due to confinement. In fiscal year 2020, Peloton had a turnover of 1,462.2 million dollars, double the year earlier and cut its losses to $71.6 million.
In the fourth quarter alone, Peloton posted a positive net result, with earnings of $89.1 million, and revenue shot up 172% to $607.1 million, coinciding with the pandemic. Fitness subscriptions soared 113% to more than 1.09 million. In fact, the chain managed to chain several quarters in profit, although the strong momentum in sales generated several stock problems in 2020.
In addition, the company also announced an expansion of its facilities in Plano (Texas), where it will remain, with the additional square meters located in an adjacent building, betting on an expansion of 9,300 square meters and increased its staff to 1,600 workers.
In fiscal 2021, Peloton failed to put its losses behind it, but continued to invest
In the fiscal year of 2021, ended on June 30, the company registered a turnover of 4,021 million dollars, which more than doubled the business of 2020. However, the company could not leave the losses behind. In fact, the group's red numbers more than doubled, going from 71.6 million dollars in 2020 to 189 million dollars in 2021. The increase was 166%. With this result, the company announced that it would obtain a total turnover of 5,400 million dollars in 2022 and a gross margin of 34% compared to the current year after the increase in sales of Tread, the treadmill that will be available from 30 August. But as the months passed, she was forced to back down.
The problem for Peloton was that, after returning to normality, it had to lower its high expectations: it will not come close to the forecasts made in times of pandemic. If in August it expected to close 2022 with revenues of 5,400 million dollars and a negative EBITDA of 325 million, in November it estimated that its revenues would be between 4,400 million and 4,800 million and its EBITDA would be negative between 425 million and 574 million. On the other hand, it also lowered its forecasts in terms of subscriptions, going from 3.63 million to between 3.35 million and 3.45 million.
After the return to normality, Peloton had to lower their expectations
In addition, Peloton registered a growth in its operating expenses of 140%, up to 622 million and recognized that it would suffer wear due to “the uncertainty of demand amid the economic reopening, the limitations in the supply chain and the pressure on costs. of basic products”.
Despite this context, the company also stuck to its business plan and reiterated that its strategy had not changed and that home fitness had been redefined, with a migration to training at home. But it took some spending adjustment measures, although it maintained the investment in the period, prioritizing accessibility and the acquisition of its products in the short term.
In February 2021, the company completed a $1 billion bond issue, after raising its initial funding forecasts by $400 million. In the same month, it announced the investment of 100 million dollars in air and sea transport to reduce the delivery times of its products, since its problem was in the transport and not in the manufacture of new units.
A month later, in March, coinciding with its entry into Australia, it acquired several more companies, in addition to formalizing the purchase of Precor and announcing the construction of its first factory in the United States, specifically in Troy Township in Wood County, Ohio. with an investment of 400 million dollars.
It also announced the launch of Peloton Corporate Wellness for companies and launched Peloton Apparel, its first own fashion line. He also signed with Adidas and in November of last year, he prepared another issue of shares for more than a billion dollars. But the bubbles burst, so the first weeks of 2022 have not been the best in the company's history.
