Peloton Interactive Inc. 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.
Shares in the fitness company fell as much as 15% to $97 in extended trading following the release of its quarterly results and a worse-than-expected outlook for fiscal 2022. The price cut, also announced Thursday, will lower the cost of Peloton’s most popular bike by $400 to $1,495, 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, which will lower monthly payments for its higher-end bike and treadmill.
The changes help remove a barrier for consumers, Peloton said, but will take a toll on sales and profit in the coming months. 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. Peloton 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.
“It did not result in a material misstatement of our financial statements or disclosures, nor will result in any restatements of historical results,” the New York-based company said. “We are committed to fully remediating these issues as soon as possible.”
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. It’s facing higher costs for materials and shipping as well, and the company is spending more on marketing as it tries to broaden its appeal.