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Peloton CEO doesn’t care that equipment is losing money, sees path forward in the app



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Barry McCarthy speaks during an interview with CNBC on floor of the New York Stock Exchange (NYSE), October 28, 2019.Brendan McDermid | ReutersPeloton CEO Barry McCarthy told investors Wednesday he doesn’t care that the company is losing money on its Bike, Tread and Row equipment. The business’s “path to the promised land,” he said, is its mobile app. Peloton posted negative margins during the holiday quarter for its pricey connected fitness products, but McCarthy said he’s more concerned with aggregate margins, which were in the positive thanks to the company’s subscription revenue. “We take a holistic view of the revenue stream and the expenses associated with both the hardware and the subscription associated with it. So from my part, I don’t particularly care about the hardware margin,” McCarthy said during the company’s earnings call. “I care about it on an aggregate basis, and I care about the relationship between the lifetime value of the customer relative to the cost of acquisition,” he said.In Peloton’s fiscal second quarter of 2023, ended Dec. 31, the exercise equipment company lost $42.8 million on its connected fitness products, bringing the division’s gross margin to negative 11.2%. The company’s overall gross margin of 29.7% was kept afloat by the $277.9 million Peloton made from its subscription b …

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