Peloton Outperforms, Plans More Micro-Stores And Pedals Back On Costs

Core Viewpoint - Peloton has posted a profit for its fiscal fourth quarter, surprising the market, and is implementing strategies focused on cost reductions and growth [2][3]. Financial Performance - The company reported a net income of $21.6 million for the three-month period ending June 30, compared to a loss of $30.5 million in the previous year, with sales declining by 6% year-on-year to $607 million [4]. - Connected fitness revenue for Q4 was $198.6 million, exceeding projections of $170.3 million, while the gross margin for hardware improved to 17.3%, up 9% from the previous year [10]. Cost Reduction Strategies - Peloton plans to reduce run-rate expenses by an additional $100 million in fiscal 2026, building on the $200 million already cut in fiscal 2025, with half of the reductions coming from indirect costs and the other half from a 6% reduction in staff levels [5][6]. - The company is launching a cost restructuring plan aimed at achieving at least $100 million in savings by the end of FY26 [6]. Store Strategy - Peloton is shifting its focus from larger stores, reducing its portfolio from 37 to 13, and plans to expand its micro-stores from one to ten [4][10]. Debt Management - The company restructured its debt last year, resulting in a net debt decline of $343 million, a 43% drop year-on-year, bringing net debt to $459 million [9]. Future Projections - For the current quarter, Peloton forecasts sales between $525 million and $545 million, which is below analyst expectations of $560 million, but for the full year, projections align with expectations at between $2.4 billion and $2.5 billion [9]. Market Response - Investors reacted positively to the announcements and figures, indicating that the strategy under CEO Peter Stern is beginning to show results, despite the share value being 20% off from the start of the year [7]. Tariff Impact - The new 50% tariffs on aluminum are expected to impact free cash flow by $65 million, prompting the company to adjust promotions and pricing strategies [11]. Global Expansion Plans - Peloton aims to introduce its brand globally through partnerships, focusing on local experiences and leveraging AI for content delivery [12].