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UPDATE 2-Peloton core earnings forecast falls short on logistics issues, shares drop

· 02/04/2021 16:35
UPDATE 2-Peloton core earnings forecast falls short on logistics issues, shares drop

Adds third-quarter forecast, shares

- Peloton Interactive Inc PTON.O forecast a lower-than-expected quarterly core earnings on Thursday as it grapples with logistics issues following a surge in demand for its exercise bikes and treadmills during the pandemic, sending its shares down 4%.

Peloton has been one of the biggest beneficiaries of coronavirus-led restrictions in the United States as more people bought the company's workout equipment and subscribed to its exercise videos to stay fit during the pandemic.

However, it has also become a target of customer ire for failing to deliver workout equipment on time due to supply chain disruptions caused by the health crisis.

"We remain inventory constrained with longer than acceptable wait times for the delivery of our products," Peloton said.

To address the situation, Peloton plans to invest $100 million in air freight and expedited ocean freight over the next six months. Those costs and higher research spending are expected to hurt its core earnings in the quarter.

The company said it was expecting adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $10 million in the third quarter, well below analysts' estimates of $65.32 million, according to Refinitiv data.

Peloton's operating expenses in the latest quarter also surged 41.5% to $366 million.

Still, the company beat Wall Street estimates for second-quarter earnings and raised its full-year sales forecast.

Revenue at Connected Fitness, which includes interactive videos that streams live classes, jumped 123.6% to $870.1 million, while its connected fitness subscriptions surged 134% to about 1.67 million.

The company's total revenue rose 128% to $1.06 billion, above analysts' expectations of $1.03 billion.nGNX9b3vrn

Peloton also expects full-year revenue of $4.075 billion or more, compared with its previous estimate of at least $3.9 billion.

Net profit attributable to Class A and Class B shareholders was 18 cents per share. Analyst were expecting a profit of 9 cents.

(Reporting by Sanjana Shivdas in Bengaluru; Editing by Anil D'Silva)

((SanjanaSitara.Shivdas@thomsonreuters.com; within U.S. +1 646 223 8780, outside U.S. +91 80 6749 1642; Twitter: @SanjanaShivdas;))