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Peloton (Beton) You just made a major announcement that customers may not be very happy about.
After revealing its fourth quarter earnings a report With its membership numbers expected to decline 2% year-over-year in 2024 and its connected fitness revenue to shrink 4%, the company opted for a radical move to boost its bottom line.
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during Earnings Call On August 22, the day the report was discussed, Peloton interim CEO Chris Brozzo 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,” said Brozo. “With that in mind, we are starting to charge a new one-time $95 activation fee on used equipment in the U.S. and Canada.”
To soften the blow, the $95 fee will include a “virtual custom fit” that members can take advantage of “to get the most out of their bike.” Members will also have access to discounts on accessories the company offers, such as “bike shoes, bike mats, and parts.”
Brozo also added that the activation fee will be a “source of additional revenue and overall profit” for the company, helping it improve the “fitness experience” for members.
In its earnings report, Peloton also revealed that despite the membership decline, its total revenue during the quarter was about $643 million, which is a small increase from the $642 million it generated during the same time period in 2023.
However, the company’s total profit saw a significant increase, increasing by 55%, compared to the same quarter last year.
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Peloton’s new fees come as the company expects its hardware sales to start to decline. In its earnings report, Peloton forecasts that during the current quarter, the number of subscribers using its devices will decline 3% year over year, and the number of users of its paid apps will decline 26%.
Peloton CFO Liz Coddington claimed during the earnings call that the expected decline in device sales is “dependent on multiple factors.”
“From a market perspective, the first quarter is typically a seasonal downturn 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 continued headwinds to sales due to the uncertain macroeconomic environment. Additionally, as we focus on improving profitability, our sales outlook reflects some of the decisions we have made that we expect will have an impact on our hardware sales in the quarter.”
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