Peloton’s Losses Decrease in Q2 2023, Confirms Precor Had Been for Sale

When Peloton released its second quarter 2023 financials on Feb. 1, CEO Barry McCarthy confirmed the rumors that Peloton had planned to sell Precor, but now it has decided to invest in the brand and keep it.

The search for a Precor buyer ended because the clearing price for Precor was lower than McCarthy said it was worth.

McCarthy wrote in a letter to shareholders: “Precor meets a significant need in the commercial marketplace and is a well-regarded brand, but over the two years we’ve owned, it we’ve underinvested in its growth and leadership team to the detriment of Precor’s revenue growth and profitability. We’ve decided to change course, injecting new leadership, rightsizing Precor’s cost structure, with the goal of restoring its growth. We maximize the value of our Precor investment by running Precor like a freestanding business, capitalizing on its core strengths, and leveraging the value it provides to owner-operators across the fitness industry.”

In December, Peloton named former Core Health and Fitness President and COO Dustin Gosz as interim CEO of Precor as it searches for a permanent CEO.

Peloton bought Precor in 2021 for $420 million, positioning it as part of Peloton Commercial. Rob Barker, who had served as Precor CEO prior to the Peloton purchase and then served as vice president/general manager of Peloton Commercial, left in February 2022. Precor had not had a CEO since then. 

But the Precor sale rumors haven’t been the only sale rumors related to Peloton. One of Peloton’s largest investors, Blackwells Capital, has repeatedly asked Peloton leadership to consider a sale of Peloton itself and has suggested companies such as Apple, Disney, Nike and Sony as potential buyers. Amazon may be another buyer option,  according to Yahoo Finance.

Peloton’s financials have been flailing since COVID-19 has waned and people have returned to gyms. In early 2021 when home workouts were still hot, Peloton was reportedly worth $50 billion. Today, the company is reportedly worth about $5 billion.

For the second quarter 2023, which for Peloton encompasses October 2022 to December 2022, Peloton reported $792.7 million in revenue, exceeding the company’s expectation of $700 million to $725 million but 30 percent lower than the same period last year.

The company’s connected fitness segment comprised $381.4 million of the revenue (driven by higher than anticipated North American deliveries) while subscription revenue made up $411.3 million. The connected fitness revenue was 52 percent lower than the same period in 2022 but subscription revenue was up 22 percent.

Peloton has had a net loss for eight straight quarters, but its $335.4 million net loss in second quarter 2023 was the smallest since fourth quarter 2021 and compared to $439.4 million in second quarter 2022.

For the company’s fiscal third quarter (which will end March 2023), Peloton anticipates revenue of $690 million to $715 million.

In his letter to shareholders, McCarthy said: “If this past year has been about restructuring Peloton’s business and stabilizing its financial performance (and it has been), then almost certainly the next twelve months will be about capturing the moment to restore Peloton’s growth as we lean into the future of Connected Fitness.”