Plagued by Problems, Peloton’s Latest Crisis Clouds Broader Health and Fitness Trend

First there was the death, accidents and lawsuits. Then came Peloton’s product recall after months of resistance. Most recently, reports of a reorg that might include layoffs and even production cuts of its core product have further slammed the once-mighty connected fitness company, which shed another 25% of its body weight Thursday (Jan. 20) — or about $2 billion — in a single-day sell-off.

Of course, through it all, there has also been COVID and the ancillary supply chain challenges for the New York-based company to contend with, although in hindsight these conflicting trends seem to have delivered a mix of both headwinds and tailwinds.

The question now is: Are these just growing pains for a company that only went public 27 months ago, or is this the byproduct of a broader downshift in personal home fitness preferences within an economy that is trying mightily to reopen?

For industry watchers and connected fitness gurus such as PYMNTS CEO Karen Webster, the string of strife for Peloton is concerning — but inconclusive.

“The big questions in my mind are whether consumers are giving up on Peloton, giving up on [in-home] fitness now that there are other ways for them to spend their free time, OR going back to the gym?” Webster said.  “The answer is probably ‘all of the above,’” she added, noting the need for more time to assess what the longer term impacts on Peloton — and the entire connected fitness sector — will be. 

Peloton’s Pushback

For its part, the upscale connected bike and treadmill company is, again, on the defensive. Hours after the CNBC report that pushed the stock to a two-year low, Peloton founder and CEO John Foley was trying to correct the record, and even went as far as saying the company had identified the individual who leaked the internal information to the press and was pursuing a lawsuit.

In addition, Peloton also rushed out a preliminary earnings report Thursday evening, nearly three weeks ahead of the planned Feb. 8 release date that it had announced just two days before.

For the three months ending Dec. 31, or Peloton’s second quarter, the company said total Q2 revenue was approximately $1.14 billion, versus its previous guidance of $1.1 billion to $1.2 billion. At the same time, eschewing the notion that it was imploding, Peloton said its Connected Fitness subscriptions came in at 2.77 million, or about 30,000 subs shy of the low end of its previous forecast, due in part to a monthly churn rate of less than 1%. 

PTON vs PLNT

While Peloton moves forward with its internal review, the fate of other players in the fitness industry is also clouding the picture, at least as far as in-home versus traditional gym memberships are concerned.

Planet Fitness, for example, recently announced that it was acquiring franchisee Sunshine Fitness and its 100+ locations for $800 million dollars in a bid to grow its corporate store base in the fast-growing Southeast.

However, within that announcement, the 30-year-old operator of some 2,200 trademarked purple and yellow gyms noted that demand for out-of-home fitness continues to grow, as the company said it added 1.7 million members last year to end the year at 15.2 million.

“We exceeded our expectations for both member and new store growth in 2021,” CEO Chris Rondeau said in a statement to the media, calling the ‘silver lining of the pandemic’ the fact that consumers realized the importance of fitness and health. 

“We’re seeing members who are visiting our stores, are visiting more frequently than in the past, demonstrating their commitment to improving their health,” said Rondeau, pointing to the opportunity that exists to get people “off of their couches” — rather than off of their Peloton bike or treadmill — which would suggest they’re pursuing an entirely different customer.