Peloton received $ 182 million in write-downs last quarter due to inventory build-up

A Peloton exercise bike for sale at the company’s showroom in Dedham, Massachusetts, USA on Wednesday, February 3, 2021.

Adam Glanzman | Bloomberg | Getty Images

groupGoodwill’s goodwill took a $ 182 million hit in its previous fiscal quarter as inventory levels rose and consumer demand for its bikes and treadmills declined.

During the quarter ended March 31, Peloton identified several factors that indicated a “trigger event” for a devaluation. the company said in a 10-Q filing Tuesday with the Securities and Exchange Commission. The charge was entirely related to its related fitness products.

These factors were the easing of demand, rising inventory and logistics costs, and a sustained decrease in the company’s stock price, Peloton said in the filing. The company’s market capitalization fell to around $ 4.5 billion from a high of around $ 50 billion earlier last year.

Peloton’s losses in the last quarter rose to $ 757.1 million, compared to a loss of $ 8.6 million a year earlier. the company reported Tuesday morning.

Sales plunged 24% to $ 964.3 million, marking Peloton’s first revenue drop since it went public in 2019.

Peloton, which is now managed by CEO Barry McCarthy, offered a weaker-than-expected outlook for its current quarter ending June 1, saying demand could continue to be weak in the near term.

With demand declining since the peak of the pandemic, Peloton’s inventories have grown substantially in the last period to a total of $ 1.4 billion in the company’s balance sheet, compared to $ 937.1 million for the year. previous. It was almost entirely made up of finished goods that are in warehouses or in transit to be received by the company, Peloton said in its 10-Q depot.

CNBC reported this in late January Peloton was planning to temporarily stop manufacturing some of its equipment to restore inventory levels. Then CEO and co-founder John Foley responded by saying that Peloton needed to do it “right size” production levels.

McCarthy, the new CEO, said on Tuesday that Peloton has not made “all of the progress in production sizing” as it should have.

He said the company’s supply chain team, now led by Andrew Rendech, worked closely with partners to order parts with longer lead times.

Peloton was able to reduce its commitments to third-party suppliers by about $ 550 million as of Dec. 31, between $ 120 million and $ 280 million, the company said in its 10-Q filing.