Shares of struggling exercise equipment maker Peloton rose sharply on Thursday after it reported its first sales increase in more than two years.
The home fitness company posted revenue of $644 million, up 0.2 percent from a year earlier, and its shares rose more than 35 percent.
That may not sound like a huge increase in sales, but after years of losses, it could be a sign that turnaround efforts are paying off, analysts say. The company saw a jump in sales at the start of the pandemic, but then it tapered off as people returned to the office and left their new home workout gear behind.
Peloton unveiled restructuring plans to cut costs in May, including laying off 15% of its workforce and the departure of former CEO Barry McCarthy.
Chief Financial Officer Liz Coddington told investors during the company’s earnings call on Thursday that Peloton will reduce its advertising and marketing spending, indicating a shift in focus from growth to profitability.
Analysts say this game plan is the best course of action for Peloton.
“Peloton has nearly three million subscribers paying $44 a month to get a device in their own home at a very good profit, and that’s incredibly impressive,” said Simeon Siegel, managing director and senior retail analyst at BMO Capital Markets. “The best thing the company can do is focus on making more money instead of making even more noise and chasing new customers.”
The past nine quarters have been a bumpy ride for Peloton, once one of the biggest stars of the pandemic when lockdowns forced gyms to close and everyone to stay home. The stock shot up nearly 400% in the 12 months before its all-time high of $167.42 in January 2021, but has been falling since then.
Extensive recalls and failed projects, including selling bikes in college colors and redesigning the fitness app with a free plan, have damaged the company’s image and scared off investors. Earlier this year, share prices plummeted to an all-time low of just $3.
Although the company is reporting a decline in paid subscriptions for the first time (from just over 3 million last quarter to around 2.98 million), Siegel says he still sees a way forward for Peloton.
“Peloton’s best offense is a very strong and compelling defense. They have to protect existing users because they make a lot of money from them, but that means they have to give up their focus on chasing new users,” he said. “If they do that, I think today’s rally will be just the beginning. If they don’t, then we’re looking at a deception.”
For more CNN news and newsletters, create an account at CNN.com
