Peloton Outperforms, Plans More Micro-Stores And Pedals Back On Costs

Peloton is reaping the rewards of cost cutting and growth strateges. (Photo by Smith Collection/Gado/Getty Images)

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Fitness brand Peloton surprised the market this week when it posted a profit for its fiscal fourth quarter and it laid out a strategy to build on cost reductions and return to growth.

Under CEO Peter Stern, the company recorded a net income of $21.6 million, compared with a loss of $30.5 million in the year prior, largely thanks to better-than-expected sales but also lower operating expenses, which Stern warned in a communication to shareholders remained too high in his opinion.

The company’s recorded net income of $21.6 million for the three-month period to June 30, equivalent to 5 cents per share, compared with a loss of $30.5 million, or 8 cents per share, a year earlier. Sales fell 6% year-on-year to $607 million.

Peloton is also planning to grow its micro-stores, having reduced its larger stores portfolio from 37 to 13 by the end of the fourth quarter. Peloton is looking to expand its micro-stores from one to 10, plus expand its preowned secondary marketplace.

“We plan to support our members’ wellness journey by expanding our offerings and strength where we are already a category leader, mental wellbeing, sleep, recovery, and over time, nutrition and hydration,” Stern said on an earnings call Thursday. “We will employ advanced technologies like AI to enhance our ability to serve as personalized coaches.”

Peloton To Reduce Costs

For fiscal 2026 starting July, the company said that it plans to reduce run-rate expenses by another $100 million, over and above the $200 million it had already cut in fiscal 2025. Half of those reductions will come from indirect costs, like renegotiating contracts, but the other half will come from reducing staff levels by 6% the company said, just over a year after it confirmed plans to cut 15% of its staff head count.

“Our operating expenses remain too high, which hinders our ability to invest in our future. We are launching a cost restructuring plan intended to achieve at least $100 million of run-rate savings by the end of FY26 by reducing the size of our global team, paring back indirect spend, and relocating some of our work,” Stern said.

Investors responded well to the announcement and the latest figures, eight months into Stern’s tenure, as his strategy starts to show signs of working. While the share value is 20% off from the start of the year, the value has at least stabilized and enjoyed a short-lived spike on yesterday’s announcements.

Peloton Debt Restructure

Peloton restructured its debt last year and in fiscal 2025 its net debt declined by $343 million, a 43% drop compared with the year-earlier period, bringing net debt to $459 million allowing for cash and cash equivalents.

For Peloton’s current quarter, it forecast sales between $525 million and $545 million, below the $560 million analysts anticipated, but for the full year its projection of between $2.4 billion and $2.5 billion tallies with expectations.

Peloton also outperformed on bike and treadmill sales, posting connected fitness revenue for Q4 of $198.6 million, well above projections of $170.3 million. Peloton’s gross margin for hardware was 17.3%, up 9% on the year prior.

However, the new 50% tariffs imposed by the Trump administration on aluminium, plus other duties, mean Peloton is expecting tariffs to hit free cash flow by $65 million and in Stern’s letter to shareholders, he said the company will have to rework promotions and adjust prices to reflect these higher costs.

“Internationally, we plan to deliver local, in-language experiences using a mix of native instruction, AI dubbing, and more flexible approaches to music for thousands of classes,” Stern said.

“Through partnerships, we aim to introduce the Peloton brand and experiences to millions of people around the world. Together, we believe these actions lay the groundwork for future, cost-effective launches of the full Peloton offering in new geographies.”