Peloton Interactive shared that it is being investigated by the U.S. Department of Justice and the Department of Homeland Security as it reported an increase in fourth quarter 2021 revenue compared to the same period last year, although sales slowed from the $1 billion it reported in its third quarter.
The two government agencies subpoenaed the company for documents and information related to its reporting of a death and injuries on its treadmills, according to an announcement from the company on Aug. 27. The U.S. Securities and Exchange Commission also is investigating the company’s disclosures about the injuries.
In May, Peloton recalled its Tread+ and Tread treadmills after reports that one child died and several others had been injured on them. The U.S. Consumer Product and Safety Commission began investigating the injuries and urged Peloton to recall the machines, but initially, Peloton declined to do so, later relenting with an apology from CEO John Foley for the company’s initial response. At that time, he shared that the company was working to improve the safety of the Tread+.
Peloton has been named in more than one lawsuit related to injuries to children allegedly on the Tread+ and Tread.
"We intend to cooperate fully with each of these investigations, and at this time, we are unable to predict the eventual scope, duration or outcome of the investigations," according to a statement from the company.
Q4 Revenue
This announcement comes as Peloton reported revenue of $936.9 million in the quarter ended June 30, 2021, which is Peloton’s fiscal fourth quarter. That was a 54 percent increase from $607.1 million reported in its fourth quarter 2020. However, it was less than in third quarter 2021 when sales came in at $1 billion, more than double the year-ago level. The lower revenue was partly due to Peloton pausing sales of its Tread+ and Tread as part of the recall.
The company reported a net loss of $313.2 million in the quarter, compared to net income of $89.1 million in fourth quarter 2020.
Peloton reported that its connected fitness segment (which includes Precor) brought in revenue of $655.3 million, which was 70 percent of its total revenue. It is an increase of 35 percent over its revenue in the same quarter last year.
For its first quarter outlook, Peloton projects $800 million in revenue, lower than fourth quarter partly due to the company’s recent announcement that it will lower the price of its original bike to $1,495 to attract new customers. Originally, the bike sold for $2,245, but that price was lowered to $1,895 in September 2020 after Peloton launched it Bike+, which sells for $2,495.
The company shared that its profitability in the near term would be affected by the price decrease as well as increases in commodity costs, freight rate increases, a sales-mix shift to Tread, investments in marketing to broaden its appeal, accelerated investments in new products and features, investments to scale member support and logistics operations, and significant investments in systems to support its growth. The company said it expects to return to adjusted EBITDA profitability for full year 2023.