Peloton Interactive Inc.
is expanding its lineup and cutting the price of its core exercise bike by 24% this week, moves aimed at taking a bigger chunk of a shifting fitness market and addressing complaints about sticker shock.
The eight-year-old fitness company has sizzled during coronavirus, with its closely watched “connected fitness” subscriber base solidly topping 1 million in recent months. In an interview, Peloton founder and Chief Executive John Foley said, “We saw a massive surge in our sales.”
Mr. Foley had intended to launch a pricier bike and cheaper treadmill along with the price cut in April. But “the world changed with Covid,” he said. The demand surge helped bury criticism—which Mr. Foley attributes to misperceptions—surrounding a Christmas advertisement but also dealt turbulence.
Supply chains snarled, deliveries faced delays as long as 10 weeks, retail outlets closed, and factories needed to add capacity amid a pandemic.
“So, we decided to pause,” he said, referring to the expansion plan. Retailers have reopened, and wait times have been cut to a few weeks.
Peloton’s moves came ahead of fiscal fourth-quarter earnings that analysts expect to be strong. The report, due Thursday, comes four months after the company said initial demand during the pandemic was extremely robust—sending the share price up 112%.
Today, Peloton sells two main pieces of equipment: a $2,245 stationary bike and a $4,295 treadmill. As of Wednesday, it will have a new $2,495 Bike+, an older bike costing $1,895, a new $2,495 treadmill, and an existing treadmill priced at $4,295.
Mr. Foley said pricing is important because it shows the company’s desire to please investors by still offering higher-margin products while broadening appeal. “The idea that this is only accessible to rich people is obviously nails on a chalkboard for me as a business leader, as a human, and as an American,” he said. More products are in the pipeline, and pricing will continue to be a focus, he added.
Cutting prices could put more bikes in the homes of people willing to shell out $39 a month for its growing menu of live content.
Peloton doesn’t break out specific delivery numbers of bikes and treadmills, but the number of subscribers to the company’s $39-a-month connected-fitness membership program is an indicator of demand for equipment sales. The figure, 886,000 as of March 31, shows how many people pay the monthly subscription fee required to connect their Peloton machine to streaming services.
JPMorgan analyst Cory Carpenter predicts subscriptions reached nearly 1.1 million this summer but points to growth as a risk. “Peloton’s biggest near-term challenge in our view is keeping up with elevated demand,” he said.
Mr. Foley is determined for Peloton to become more of a full-service fitness provider, as conventional gyms struggle amid social-distancing norms.
“We plan to be the global digital fitness technology platform that allows you to work out at home and not have to travel,” Mr. Foley said. He compared Peloton to a console—like Sony Corp.’s PlayStation—that allows users to access superior games without venturing out to an arcade.
In addition to its popular cycling classes, Peloton streams yoga instruction, strength training and running sessions and sells apparel and weights.
Peloton faces growing competition.
Traditional gyms, including Equinox Group and
Planet Fitness Inc.,
have recently rolled out streamed fitness classes. Competitors like NordicTrack and Echelon Fitness have cheaper bikes or other streaming equipment, such as rowers or ellipticals.
Lululemon Athletica Inc.,
meanwhile, recently paid $500 million for Mirror, which sells a $1,500 tech-enabled mirror with a camera and speakers so customers can participate in live classes.
Peloton’s new bike is designed to accommodate multiple activities. In addition to upgraded cycling features and sleeker components, the Bike+ has a bolder sound system and a 24-inch touch screen that swivels to accommodate yoga classes or weight training in a separate area.
Mr. Foley said Peloton will continue aiming to lower prices but sees the current minimum monthly cost of $49 for a financed base-model bike as affordable, particularly when split by a couple.
“Twenty-four dollars a month starts to be Planet Fitness-style economics,” he said. Planet Fitness memberships begin at $10 a month, and Mr. Foley’s equation didn’t include the $39 monthly streaming fee, which can be shared.
Late last year, pundits and social-media users ripped Peloton’s holiday ad depicting a wealthy man giving his fit wife a bike as sexist and elitist.
Mr. Foley said the backlash was surprising, reflecting outdated notions about what products like Pelotons are for. “Fitness equipment is still seen by some people as raw weight loss…you know ‘I lost 30 pounds in 30 days thanks to the belly app burner.’ ”
He says decades of marketing efforts have led to “people thinking that Peloton or any product like Peloton would be about weight loss and you would give it to your wife because she needs to lose weight.” He said Peloton’s intention was to depict her “personal journey of success and fitness and endorphins and wellness.”
Mr. Foley also said the attacks came after an initial public offering that attracted a lot of attention.
“There could have been some trolls in the blogosphere or Twitter-sphere wanting to take us down,” he said. “So it could have been seeded by some people that had some financial interest in downward pressure on our stock, but that could be just me speculating.”
Write to John D. Stoll at [email protected]
Corrections & Amplifications
Today, Peloton sells two main pieces of equipment: a $2,245 stationary bike and a $4,295 treadmill. An earlier version of this article incorrectly said the stationary bike cost $2,255. (Corrected on Sept. 8)
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