Peloton Interactive Inc. (NASDAQ: PTON), one of the stock market darlings of the early stages of the COVID-19 pandemic, has fallen apart. Several analysts believe this will only get worse during the holidays. The exercise equipment company needs to show that its sales rose sharply in November and December. Management already knows how the numbers will look.
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One analyst’s comments sum up Peloton’s problem. John Blackledge of Cowen said, as quoted by Barron’s, “Our proprietary survey data also reflects a stabilization in consumer interest, but at lower levels relative to pre-pandemic demand.” In other words, there is no recovery in the future.
2022 has been a brutal period for Peloton shareholders. The stock is off 64% this year. A good deal of the sell-off is because investors have no confidence in Peloton’s new CEO, Brian McCarthy, who was chief financial officer of Spotify and Netflix. His background hardly seems appropriate to turn around a fitness company.
McCarthy has made several questionable decisions. Among these is to sell Pelotons on Amazon. That puts its products on a platform that sells less expensive competition. It took a similar risk with Dick’s Sporting Goods. Peloton also has started to sell used versions of its products, which is a sure way to create competition for its new ones. It also devalues the products in the eyes of potential customers.
McCarthy has shuttered many Peloton retail locations and outsourced much of the company’s manufacturing. As part of this strategy, he has laid off a portion of the workforce.
The fruit of McCarthy’s work is revenue dropping 23% in the most recently reported quarter to $617 million. Peloton lost $409 million in the period.
McCarthy has expressed anxiety about the holiday season and the economy in general. Put another way, he has some skepticism about his own recovery plans.
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