Shares of Peloton (PTON) were tumbling in pre-market trading Wednesday, dropping as much as 28% after the connected fitness bike maker said it saw subscriber growth slowing and that its seat recall cost “significantly exceeded its expectations.”
“Growth was also slowed by a seat recall that we announced on May 11, as first-party and third-party sales of our original Peloton Bike were restricted to seat availability,” the company said in a statement. Shareholders’ letter on Wednesday.
“The cost of this recall significantly exceeded our initial expectations resulting in an additional accrual of $40 million in the quarter for actual costs incurred as well as expected future expenses related to the recall.”
Members also paused their monthly subscriptions during the quarter, pending receipt of a replacement seat. Peloton subscribers decreased by 29,000 from the previous quarter, although subscriptions increased year-over-year by 4%.
The company’s fiscal fourth-quarter revenue of $642.1 million was down 5.4% from the same period last year, but came in above Wall Street’s forecast of $641.6 million.
However, the first-quarter revenue forecast of $580 million-$600 million came in short of the consensus analyst forecast of $647.8 million.
The shares are set to open just under $5 each, a far cry from the all-time highs of over $160 in December of 2020. Year-to-date the stock is down 11%. The stock has 11 analyst buys, fifteen hold and four sell ratings.
Peloton also noted that for the second time it had positive free cash flow in the most recent quarter. However, the company does not expect free cash flow to remain positive in the next two quarters; Peloton expects to achieve this metric again in the second half of its fiscal year 2024.
Peloton has been struggling to turn itself around after its previously high flying stock began to sag during the pandemic amid Suppliers Problems and safety incidents that led to recalls. Reopening after the pandemic, too dwindled on the results With high interest rates penalizing fast farmers like Peloton, too.
Last year, the company appointed veteran technical director Barry McCarthy to lead the struggling equipment maker.
“If you’re wondering whether or not Peloton can make an epic comeback, this quarter’s results show that the changes we’re making are working,” McCarthy told investors in February.
Ines Ferry is the chief business correspondent for Yahoo Finance. Follow her on Twitter at @ines_ferre.
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