- Peloton faces an infamous challenge for gyms and retailers: People spend more and exercise more at certain times of year.
- The connected-fitness startup, which published its IPO filing this week, earned 63% of its annual revenue in the six months between October and March in both of its last two fiscal years.
- Lumpy revenues could be a headache for Peloton, as mistakes in one of its busy quarters would have a disproportionate impact on its yearly sales and profits.
- Read more about Peloton on Markets Insider.
Peloton has revealed it faces an infamous challenge for gyms and retailers: People spend more and exercise more at certain times of the year.
The connected-fitness startup, which published fresh insights into its business this week ahead of its public listing, earned 63% of its annual revenue between October 1 and March 30 in both of its last two fiscal years. On the other hand, it generated less than 13% of its sales in the three months to September 30 in both years.
Lumpy revenues could be a headache for Peloton, as mistakes in one of its busy quarters would have a disproportionate impact on its yearly sales and profits. It could also struggle to navigate seasonal fluctuations in demand: It might have to hire more instructors or sales staff during busy periods and downsize in quieter months, and carefully adjust its spending throughout the year.
"Historically, we have experienced higher revenue in the second and third quarters of the fiscal year compared to other quarters, due in large part to seasonal holiday demand, New Year's resolutions, and cold weather," Peloton said in its IPO filing.
In other words, consumers splurge on its stationary bikes and treadmills while shopping for Christmas gifts and Black Friday deals. Peloton also cashes in on people vowing to lose weight, get fit, and live healthier at the start of the year. Moreover, cyclists and runners shift gears during the winter and exercise more indoors, boosting demand for fitness equipment and classes.
The seasonal pattern is most glaring in Peloton's sales of connected-fitness products, which include its indoor bike and treadmill, related accessories, delivery and installation fees, and warranty payments. The segment racked up $483 million — 67% of its annual revenue — in the second and third quarter of Peloton's last fiscal year. It earned $230 million — 66% of its yearly sales — in the same period of the previous fiscal year.
Peloton's spending shows a similar pattern, as the company doubles down on advertising during the holiday season. It stomached more than 60% of its sales and marketing costs in the middle two quarters of its past two fiscal years.