Peloton Brand Check-up: Built for a Boom That Ended
On June 25, 2024, Peloton shares closed at $3.37. In January 2021 they closed at $167.42. In between, the company recalled its treadmills and then its original Bike, replaced its co-founder as chief executive, cut thousands of jobs and saw a second chief executive step down. We examined Peloton as we would any patient: the symptoms, the causes and what is left to work with.
Key takeaways
- Peloton’s revenue rose to $4.02 billion in fiscal 2021, then fell to $2.80 billion in fiscal 2023 after the company had added capacity for demand that did not last.
- Two large recalls, about 125,000 Tread+ treadmills in 2021 and about 2.2 million Bikes in 2023, hit a premium brand that sells safe training at home.
- Paid Connected Fitness Subscriptions were flat at about 3.06 million year over year in March 2024, while paid App subscriptions fell 21% after the 2023 relaunch.
- The May 2024 refinancing bought time, but Peloton still needs a permanent chief executive and a clear answer to who the brand is for.
Download the full Peloton Brand Check-up (PDF): vital signs, timeline, diagnosis, treatment and sources.
The symptoms
The share price tells the story in one line. Peloton closed at $3.37 on June 25, 2024, 98% below its record close of $167.42 on January 13, 2021. At the peak, its market value was nearly $50 billion. Based on the 370.8 million Class A and Class B shares it had outstanding on April 29, it is now worth about $1.25 billion.
The operating signs match. Revenue for the quarter to March 31, 2024 was $717.7 million, down 4% from a year earlier, and hardware revenue fell 14%. Paid Connected Fitness Subscriptions were 3.056 million, against 3.055 million a year before. Paid App subscriptions fell 21% to 674,000. The company lost $167.3 million in the quarter.
Built for a boom
Lockdowns turned a premium exercise bike into a must-have. Peloton’s revenue rose from $1.83 billion in fiscal 2020 to $4.02 billion in fiscal 2021. The company built for that pace. It bought Precor for $420 million and announced a $400 million factory in Ohio. By January 2022, CNBC reported, demand had fallen, production was being paused and thousands of bikes and treadmills sat in warehouses or on cargo ships.
Demand did not come back. Fiscal 2023 revenue was $2.80 billion, about 30% below the 2021 peak, and the company lost $1.26 billion that year after a $2.83 billion loss in fiscal 2022. Capacity had been sized for a moment, not a market.
Two hits to trust
A premium home product sells safety as much as results. In May 2021 Peloton recalled about 125,000 Tread+ treadmills after a 6-year-old child died and 72 incidents were reported. The recall came weeks after the regulator had publicly warned consumers about the product. John Foley, co-founder and then chief executive, said “Peloton made a mistake in our initial response” to the regulator’s recall request. In May 2023 the company recalled about 2.2 million Bikes because the seat post could break during use.
New leaders, same question
In February 2022 Foley stepped aside for former Spotify executive Barry McCarthy. The same day Peloton announced about 2,800 job cuts and the winding down of its Ohio factory plan. McCarthy then widened the pitch. A May 2023 relaunch, announced as Peloton reintroducing itself for anyone, anywhere, added a free app tier and paid tiers up to $24 a month.
The wider pitch has not produced growth. A year later, paid App subscriptions were down 21% and Peloton had cut its year-end App forecast by 150,000. Sales and marketing expense rose to $170.3 million in the March quarter from $154.6 million a year earlier, while revenue fell. When spend rises and the customer base does not, the first job is to find out which channels still bring in paying members, the kind of work covered in our guide to SaaS marketing attribution.
On May 2, 2024, McCarthy stepped down. Board members Karen Boone and Chris Bruzzo became interim co-CEOs. Peloton also announced a plan to cut about 15% of its staff, roughly 400 people, and more than $200 million in annual costs.
What is still working
There is a stable core. Average monthly churn for paid Connected Fitness Subscriptions was 1.2% in the March quarter, and free cash flow was positive at $8.6 million, the first positive quarter in 13. On May 30 Peloton completed a $1.35 billion refinancing and repurchased about $800 million of notes due in 2026. That buys time. It does not tell new customers why they should choose Peloton. A marketing audit would start with the members who stay: who they are, why they joined and where more people like them can be found.
What growing companies can learn
Treat a spike as a question, not an answer, and add capacity in steps you can reverse. Treat safety and service as part of the brand, because one slow response can undo years of premium positioning. When you reposition, as our guide to brand positioning explains, pick the next customer you want and measure whether they arrive and stay. Telling everyone a product is for them is not a strategy.
This check-up uses public information available on June 25, 2024. It is brand and marketing analysis, not investment advice.
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