Just a few years after its rapid rise to success, Fitness unicorn Peloton is struggling with stagnant sales and controversy. Analysts say its latest strategies won’t help it overcome its problems.
The company announced plans Wednesday to partner with Hyatt to install its equipment in more than 800 hotels in the United States, Canada, United Kingdom, Germany, Austria and Australia, members of the rewards program Hyatt earning points for using the amenity. About half of the locations will have in-room TVs showing Peloton’s fitness content.
The announcement comes a day before Peloton’s first-quarter earnings report, where the company is expected to report a 3.75% sales loss. Neil Saunders, managing director of GlobalData’s retail division, said Fortune the partnership could help increase Peloton’s exposure, but it likely won’t translate into new sales. The company reported revenue of $743.6 million in 2023, up from $792.7 million the year before, but hopes to return to revenue growth by June.
“The products are very expensive,” Saunders said. “Many consumers who want them have already gotten them, so they are not in the market to buy new Peloton products.” A Peloton Bike costs $1,445 and the Bike+ costs $2,495, still cheaper than the Peloton Row at $2,995.
“These deals and partnerships are helpful to Peloton, but they don’t really change the fundamental trajectory of the company,” he added.
The partnership with Hyatt is one of several strategies Peloton is using to revive the company’s stalled growth. In addition to a similar partnership with 5,400 Hilton hotels in the United States, Peloton relies on retail partners like Dick’s Sporting Goods and Amazon to sell its products, taking pressure off its bankrupt brick-and-mortar showrooms. . Last month, it quietly disbanded the free subscription to its app less than a year after its introduction, after failing to attract paying subscribers.
Peloton’s fall was almost as rapid as its rise. At its peak in January 2021, Peloton’s market capitalization soared to more than $45 billion when the lockdown forced people to seek out virtual group cycling classes. It has since lost 90% of its value and hovers around $1.14 billion as it barely maintains the unicorn status it achieved after a 2017 funding round took it to a valuation of $1.25 billion. The company’s shares fell to penny stock status at $3.11 per share, a fraction of its IPO price of $29.
Peloton did not respond to Fortunerequest for comment.
A hostile market
Peloton, founded in 2012 as a fitness equipment company with an interactive platform, boomed during the pandemic thanks to gym closures and remote working. Its sales saw a 172% increase in the first six months of 2020, generating $1.82 billion in revenue that year, and more than doubled that to $4 billion a year later. But according to Jessica Ramírez, senior retail research analyst at investment firm Jane Hali & Associates, Peloton didn’t know what to do with its rapid rise to success.
“I don’t think they thought [about] what was going to happen after the pandemic,” Ramírez said Fortune. “When you’re growing a business, you always have to think about the future…because the consumer is going to change. The consumer is constantly evolving.
The company’s stumbling blocks also included a series of controversies, including Sex and the City star Chris Noth, who was featured in a Peloton ad, being accused of sexual assault in 2021, forcing the company to pull the campaign . Peloton recalled its Tread Plus treadmill the same year after it was involved in the death of a child. Co-founder John Foley stepped down as CEO in 2022, after rumors that he failed to accurately forecast the market and act on product recalls. His successor, Barry McCarthy, laid off thousands of employees and outsourced operations to third parties to try to return the company to profitability.
Even on the other side of the pandemic, scandal and corporate restructuring, Ramírez isn’t convinced the market will be kind to Peloton.
“I find Peloton a tough sell in today’s environment, simply because the consumer is living their everyday life,” she said.
Not only do fewer remote work opportunities mean fewer reasons to workout at home, but those who continue to work from home want to get out of the house and find community in fitness environments, especially fitness environments. outdoor activities like running. The Strava app reached 100 million users in July 2023, doubling its base in just two years. Nike app users number more than 500 million people. Not only is running more popular, it’s also less expensive, Ramírez said, costing you just a pair of sneakers.
Putting the pieces together from its recent past doesn’t equal success: “I don’t think the trajectory is looking very good for Peloton, to be honest,” Saunders said. “I see them as a company that will continue to shrink, that will continue to have to make very difficult restructuring decisions, and as a company that will remain weak, if not zero, for the foreseeable future.”
Redefining success
Despite Peloton’s share of problems, Simeon Siegel, managing director and senior retail analyst at BMO Capital, isn’t ready to call the company a failure. Too often, shareholders and consumers render verdicts on companies based solely on lofty initial expectations.
“We judge them relatively,” he said Fortune. “Compared to what this company promised, [Peloton] was a clear disappointment. For a businessit is a success.”
Few fitness companies can create a compelling product and have 3 million subscribers, Siegel argued. Analysts agreed that Peloton has good products and consistent consumer loyalty. Peloton will only be a failed company in Siegel’s eyes if it doesn’t rely on these loyalists and continues to seek growth that simply isn’t there.
“There’s an underlying business that brings in a lot of money,” he said. “Most struggling companies can’t say that.”
