Platoon (PTON) just made a major announcement that customers may not be too excited about.
After revealing its fourth quarter earnings report By 2024, with its membership down 2% year-over-year and its revenue from connected fitness products down 4%, the company is opting to take drastic action to boost its profits.
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During August 22nd earnings callPeloton interim co-CEO Chris Bruzzo revealed that customers who purchase used Peloton bikes from third parties will face a hefty “used equipment activation fee.”
“While these secondary market sales are not coming from Peloton-owned channels or any of our third-party distribution partners, we want to ensure that these new members receive the same high-quality onboarding experience that Peloton is known for,” Bruzzo said. “With that in mind, we are initiating a new one-time $95 used equipment activation fee in the U.S. and Canada.”
To lessen the impact, the $95 fee will include a “virtual custom fit” that members can take advantage of to “get the most out of their bike.” Additionally, members will have access to discounts on accessories offered by the company, such as “bike shoes, bike mats, and replacement parts.”
Bruzzo also said the activation fee will be “a source of incremental revenue and gross profit” for the company, helping it improve the “fitness experience” for members.
In the earnings report, Peloton also revealed that despite declining memberships, its total revenue for the quarter was about $643 million, which is a slight increase from the $642 million it earned during the same time period in 2023.
However, the company's gross profit experienced a significant increase, rising by 55% compared to the same quarter last year.
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Peloton’s new fee also comes at a time when the company expects its hardware sales to begin to slow. In its earnings report, Peloton predicts that during the current quarter, subscribers using its hardware will drop 3% year-over-year, and its paid app users will also decline by 26%.
Peloton CFO Liz Coddington said during the earnings call that the expected decline in hardware sales is based “on multiple factors.”
“From a market perspective, the first quarter is typically a seasonally slow quarter for hardware sales as consumers shift their discretionary spending toward categories such as travel and sporting goods during the summer months,” Coddington said. “We also expect sales to remain a drag as a result of an uncertain macroeconomic environment. Additionally, with our focus on improving profitability, our sales outlook reflects some decisions we have made that we expect will impact our hardware sales in the quarter.”
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