Revolutionizing Growth: Peloton Sets Sights on Innovative Strategies Beyond Price Promotions

According to Peloton's CEO, the company has undergone a transformation in its business model, moving away from its previous dependence on price promotions. The CEO, Barry McCarthy, joined the struggling exercise business in February 2022, and is confident that the relaunched brand will propel Peloton towards growth.

"When I entered the premises, I noticed that our options for expanding the business were limited, with price promotions being our primary method as a commercial enterprise," McCarthy stated during an investor call today (23 August).

He emphasized that the business now relies less on price promotions and has various strategies in motion to drive growth. Despite a 20% decrease in share price after reporting higher-than-anticipated losses per share, the CEO remained optimistic.

In its fourth quarter of 2023, which ended on June 30th, the company had losses per share of $0.68 (£0.53), a significant improvement compared to the same period in 2022 when losses per share were $3.72 (£2.93). However, it was expected that losses per share for Q4 2023 would only be $0.38 (£0.30).

Despite the decrease in share price, McCarthy expressed great enthusiasm and optimism about the future of the business. He believes that there is a noticeable gap between the stock price for Peloton and the positive energy currently driving the company.

The company possesses various resources, including a revamped brand, according to him. He praised the exceptional work of CMO Leslie Berland and her marketing team, who were appointed in January and are doing an outstanding job.

Under Berland's guidance, Peloton is currently undergoing a brand transformation, aiming to connect with a younger audience, appeal to beginners in fitness, and alter the perception of the brand from just a stationary bike company.

Berland stated in May that Peloton's brand relaunch was a crucial component of its growth strategy. She emphasized that this initiative was of utmost importance as they envision their future and aim to establish a strong foundation for the company.

McCarthy acknowledges that it is still in the early stages of the relaunch, but he is confident that the messages about Peloton's comprehensive offering, which includes a fitness app and equipment, are resonating with the audience. He mentioned that they have already observed significant improvements in perception across various metrics, particularly among Gen Z and those who are starting their fitness journeys.

In addition, he emphasized the potential of collaborations between Peloton and third-party entities. During July, the company revealed its partnership with Liverpool Football Club. This collaboration involves supplying bikes at the club's training facility and incorporating LFC-related digital content on Peloton's platform. McCarthy stated that through these partnerships, Peloton aims to increase awareness and appeal to fitness-oriented customers.

Although the CEO expressed optimism about these endeavors, he refrained from speculating on their potential impact on the business. Following the pandemic, the company has faced challenges in its efforts to regain growth.

"We lack an operational track record for these new endeavors, making it challenging to accurately forecast their influence on our growth," he stated.

Peloton incurred operating losses of $1.2 billion (£944 million) in its complete fiscal year 2023, while recording revenues of $3.6 billion (£2.8 billion) for the year.

Peloton's app experienced a 4% increase in subscribers compared to the previous year, but faced a quarterly decrease of 29,000 users. This decline was linked to a slowdown in hardware sales and higher than expected customer turnover. McCarthy emphasized that Peloton operates as a "seasonal business".

The slowdown in consumer spending surpassed our initial expectations from May and the first three weeks of June as people started prioritizing travel and experiences. However, eight weeks ago, we observed a significant shift in this trend as hardware sales began to reaccelerate. Despite this positive development, the speaker acknowledged to the investors that the specific factors driving this reacceleration remained unknown.

“I wish I did [know],” he admitted. “If I did, we could lean into it and try to leverage it.”