Peloton third-quarter revenue forecast lags estimates, shares fall

(Reuters) - Exercise bike maker Peloton Interactive Inc PTON.O on Wednesday forecast current-quarter revenue below Wall Street estimates and hinted at slowing sales growth, sending its shares down nearly 8%.

A Peloton exercise bike is seen after the ringing of the opening bell for the company's IPO at the Nasdaq Market site in New York City, New York, U.S., September 26, 2019. REUTERS/Shannon Stapleton

The loss-making company, which sells stationary bikes priced at over $2,200 and offers streaming exercise videos, also said average selling prices declined quarter-over-quarter during the holiday season due to heavy discounts.

“We run a holiday promotion in Q2 leading up to Cyber Monday. This year, it was a 2-week promotion. So that is really what is driving some sequential decline as well year-over-year,” Chief Financial Officer Jill Woodworth said on a post-earnings call.

U.S. retailers rushed in with faster-than-ever delivery deals and earlier Christmas promotions in hopes of easing the impact of the shorter holiday selling season, which had six fewer days.

Total revenue in the fiscal second quarter rose 77.4% to $466.3 million, down from more than doubling in the previous quarter.

The company forecast third-quarter revenue to be between $470 million and $480 million, compared with analysts’ average estimates of $493.3 million, according to Refinitiv data.

Peloton cited tough comparisons from a year earlier for the forecast. The company’s investment in logistics and supply-chain helped it cut down order-to-delivery times during the latest holiday season, a problem it had faced in fiscal 2019 that pushed a bulk of the deliveries into the third quarter.

“While the company seems to be prudently conservative, we think the perceived step-down in revenue growth rate is clearly below investors’ expectations,” said MKM Partners analyst Rohit Kulkarni.

Analysts have warned that Peloton’s bikes face competition from aggressive and cheaper rivals.

Peloton in December dropped monthly subscription prices for its fitness video streaming app to $12.99 from $19.49 and extended a free trial period by two weeks.

Shares of the company are up about 13% since the IPO in September. The stock dropped in early December after the company’s Christmas advertisement, called “The Gift That Gives Back,” sparked a storm on Twitter, with several users criticizing it as being “sexist” and “dystopian”.

Net loss attributable to Class A and Class B shareholders narrowed to $55.4 million, or 20 cents per share, in the second quarter ended Dec. 31, from $105.2 million, or $4.83 per share, a year earlier.

Analysts on average had expected the company to report a loss of 36 cents per share and revenue of $423.42 million.

Reporting by Dania Nadeem and Ayanti Bera in Bengaluru; Editing by Sriraj Kalluvila