Peloton quarterly sales top $1 billion, but shares fall as cycle maker makes further supply chain investments

In the wake of the higher sales, Peloton now expects full-year revenue to top $4 billion, up from prior forecast of more than $3.9 billion. Analysts had been calling for $3.95 billion.

The company kept its earnings outlook for fiscal 2021 unchanged.

Peloton said it continues to see robust demand for its products, and that it will make additional investments in its supply chain to ease bottlenecks, which could weigh on profits.

In a letter to shareholders, the company said it will be investing more than $100 million in air freight and expedited ocean freight over the next six months to help speed deliveries.

“While this investment will dampen our near-term profitability, improving our member experience is our first priority,” the company said.

Peloton ended its latest quarter with 1.67 million connected fitness subscribers, up 134% from the prior year. Connected fitness subscribers are people who pay a monthly fee to sync Peloton’s workout classes to their Peloton equipment, versus accessing the programs separately through a phone or tablet device and paying a smaller rate.

The company expects to have 2.28 million or more connected fitness subscriptions by the end of the fiscal year, up from a previous outlook for 2.17 million users.

Peloton’s retention rates remain strong, a good indication of its future success. Average net monthly connected fitness churn was 0.76% during the latest quarter, which marked a slight uptick from 0.65% during the prior period. But the company said it expects its churn rate during the current quarter will be below 0.75%, and its churn rate for fiscal 2021 will be below 0.80%, better than a prior outlook of under 0.90%. The lower the churn rate, the less turnover Peloton is seeing with its user base.

And the cycle maker continues to look for ways to entice its customers to exercise more. It said total workouts during the latest period surged to more than 113 million from 26 million a year ago. It recently launched a feature where users can “stack” classes back to back, and have them play automatically one after another. It also recently added Pilates classes to its catalog.

Peloton shares are up more than 365% from a year ago. The company has a market cap of $46 billion.