Spin Cycle

 

Prior to March of 2020 when both my gym and favorite restaurants locked down, Peloton was a brand that I had only fleeting contact with and knowledge of.

Yes, I knew they made absurdly expensive stationary bikes and featured impossibly fit instructors on their interactive site, but other than that very little.

Until my better half decided that since the gym was in lockdown, she was going to purchase one. Reluctantly I agreed. So, four figures later, the bike arrived not with one installer but rather two. Each was outfitted more like an electrician ready to rewire my entire house than your standard delivery person who hands you an invoice and tells you to sign.

They needed the WiFi code as to connect with their exercise link. I later learned that they even have their own streaming cable station, which of course she quickly became a subscriber as well.

It seems we were hardly the only family with that idea.

I heard that sales of their products (which I again learned later included a treadmill series with a decidedly non-economy price tag of $5,000) went through the roof during the pandemic and yet another missed stock opportunity for yours truly.

However not all has been rosy at the New York-based company.

Recently, incidents of child injuries on its treadmill became public including a toddler who became entwined on one of rubber tracks and tragically died, triggering a lawsuit.

In addition, its battled supply constraints and instituted a recall of its recently launched “The Tread” treadmill line, to fix a recurring screen detachment problem. And, like many other product-based companies, Peloton has faced higher costs for materials and shipping.

It announced it would slash the cost of its most popular bike by $400 (of course after my purchase) to position the product as more “mainstream,” it’s second price cut this year. It will also reconfigure its financing plans extending them to 43 months thereby lowering payments for its top-of-the-line products like the treadmill, which normal folks might have had to take out a second mortgage to pay for.

Compounding that financial malaise, Peloton also pointed to a problem with its accounting. An audit of its fiscal 2021 found “a material weakness” in the internal controls stemming from a discrepancy in the company’s year-end inventory counts – or as the company explained it, a discrepancy between a manual count of the products in its facilities with what the system said they should be.

The company warned that its adjusted loss would be $325 million in the current fiscal year, and its sales this quarter will miss Wall Street estimates. Still, Peloton sales in the just-ended quarter rose 54% to $936.9 million.

Peloton does however expect to return to profitability by fiscal 2023 in additional to readying new products such as rowing machines and heart-tracking devices.

The bride has repeatedly told me how much she likes rowing. I explained to her the local park rents boats on the weekend.

And she won’t even need an interactive screen.