Peloton Interactive Inc. reported its first sales increase in nine quarters and beat expectations, signaling that the fitness-equipment maker’s years-long turnaround effort is paying off, sending its shares soaring 28% on Thursday.
The restructuring is aimed at stemming a decline in sales of premium home equipment, which had been strong during the pandemic, as rising interest rates and rising inflation caused customers to cut back on discretionary spending.
Peloton reported fourth-quarter sales increased 0.2%, its first year-over-year increase since the second quarter of fiscal 2022.
“While the growth rate is modest, it’s notable given that it occurred during the summer, a typically slower period for sales as consumers tend to get outdoors more for exercise,” said eMarketer analyst Zach Stamber.
Shares of connected fitness equipment makers are on track to hit their highest levels in 18 months if the current rally holds.
Barry McCarthy, who stepped down as CEO in May after nearly two years in the role, focused on restoring growth by expanding the company’s subscriber base through its app offering, bike rental program and retailer partnerships.
Peloton also delivered two consecutive quarters of adjusted core earnings and free cash flow growth, buoyed by the former CEO’s efforts to shrink the company’s bloated cost structure.
“Between the third and fourth quarters, Peloton went from needing a life jacket immediately to being able to stay afloat for a little longer,” said Paul Cero, chief investment officer at Cedar Grove Capital Management.
Earlier this year, Peloton announced a broad restructuring plan that included cutting its global workforce by 15%, closing more retail stores and changing its international sales plans.
The company also refinanced its debt to avoid a liquidity crisis and buy itself time to implement its restructuring plan.
Still, interim co-CEO Karen Boone said Peloton remains unlikely to grow membership in fiscal 2025, adding that the search for a new CEO is ongoing.
The company reported fourth-quarter sales of $643.6 million, beating analyst expectations of $630.5 million, according to LSEG data.
