Pandemic darling Peloton's cash-crunch warning pounds shares
Reuters
Published May 10, 2022 07:08AM ET
Updated May 10, 2022 01:16PM ET
(Reuters) -Peloton Interactive Inc is "thinly capitalized", the fitness-equipment maker's chief executive warned on Tuesday, as unsold inventory coupled with mounting costs pushed the once pandemic darling into a big quarterly loss.
The company also forecast weak sales as it wrestles with waning demand for its stationary bikes and tread machines amid concerns of subscription cancellations due to price hikes.
Shares tumbled as much as 18% to a record low of $11.7 in early trading. Peloton (NASDAQ:PTON)'s market value has crashed to $4.69 billion from a peak of nearly $50 billion during the pandemic when its bikes and on-demand fitness content were lapped up.
Earlier this year, Peloton replaced its chief executive officer under pressure from an activist investor and unveiled measures including price cuts for its equipment while focusing on its subscription plans to turn around the company.
Still, revenue slumped 23.6% in the third quarter and loss widened to $757.1 million from $8.6 million a year earlier.
"Inventory has consumed an enormous amount of cash, more than we expected, which has caused us to rethink our capital
structure," CEO Barry McCarthy said in a letter to shareholders.
"We finished the quarter with $879 million in unrestricted cash and cash equivalents, which leaves us thinly capitalized for a business of our scale."
The company said it had signed an agreement with JP Morgan and Goldman Sachs (NYSE:GS) to borrow $750 million.
Michael Hewson, chief market analyst at CMC Markets UK, agreed with McCarthy on the company's huge inventory being an obstacle, given there was little sign of a demand pickup any time soon.
"This high level of inventory is a problem for a company with not much in the way of cash."
For the fourth quarter, Peloton forecast total revenue of between $675 million and $700 million, well below Wall Street's expectations of $821.7 million.
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.