Shares of fitness equipment maker Peloton Interactive (NASDAQ:PTON) are falling after the company warned that a price cut would hurt its bottom line this year and that it found a problem with the way it accounts for inventory.
The shares were down as much as 15% to $97 U.S. after the release of Peloton’s quarterly results and a worse-than-expected outlook for fiscal 2022.
A new price cut will lower the cost of Peloton’s most popular bike by $400 U.S. to $1,495 U.S., part of a bid to make the upscale product more mainstream. And Peloton is now offering financing plans that last as long as 43 months, up from 39 months previously.
The changes help remove a barrier for consumers, Peloton said, but will take a toll on the company’s sales and profit in the coming months. Peloton warned that its adjusted loss would be $325 million U.S. in the current fiscal year, and its sales this quarter will miss Wall Street estimates.
The company said it expects to return to profitability by fiscal 2023.
The company also pointed to a problem with its accounting. An audit of fiscal 2021, which ended June 30, found “a material weakness” in the internal controls that govern Peloton’s financial reporting. The problem stemmed from a discrepancy in the company’s year-end inventory counts.
Peloton, best known for its stationary bikes and online classes, has benefited from consumers exercising at home during the pandemic. But it’s also had setbacks in the past year, including supply constraints and a recall of its recently launched treadmill line.
Even before the current decline, Peloton’s stock was down 25% this year.
Earlier this week, Peloton announced plans to restart sales of its lower-end treadmill, the Tread, which had been taken off the market to fix a problem with its screen detaching. A more upscale model, the Tread+, is still on hold after it was linked to child injuries.
Peloton’s sales in the second quarter were slightly stronger than analysts had expected. Revenue rose 54% to $936.9 million U.S., compared with an average estimate of $929 million U.S.
Peloton posted a net loss of $313.2 million U.S., or US$1.05 U.S. a share, in the quarter, compared with net income of $89.1 million U.S., or 27 cents U.S., a year earlier.
The company expects an adjusted loss of $285 million U.S. in the current third quarter, with $800 million U.S. in revenue. Analysts had projected sales of $1 billion U.S. for Q3.