Peloton said it expected its voluntary recall of up to 125,000 treadmills to cost $165m as it ceases taking orders, cancels any deliveries, issues full refunds and waives three months of subscription fees to anyone who keeps their machines.
The fitness equipment group recalled the treadmills on Wednesday following reports of injuries and one death.
Chief executive John Foley, who came under fire for initially rejecting regulators’ warnings about the treadmill, apologised for earlier inaction and said he would rather take some “short term pain” to prioritise safety and future investment in the brand.
For anyone keeping the machines, a software update “in the coming days” will lock the treadmill’s belt when it is not in use to prevent accidents in which pets and children have been pulled under the machine.
The projected hit to earnings came as Peloton reported fiscal third-quarter revenues of $1.26bn for the three months to the end of March, outpacing forecasts of $1.1bn for a 141 per cent gain from a year before.
The connected fitness pioneer, one of the biggest beneficiaries of pandemic’s stay-at-home orders as gyms around the world were forced to close, expected June quarter revenues of $915m, versus forecasts of $1.16bn, according to estimates compiled by Visible Alpha.
For Peloton’s full year ending in June, adjusted earnings before interest, taxes, depreciation and amortisation was expected to be $240m lower. That bigger hit reflected lost sales of treadmills as well as an extra $15m in expedited shipping costs as the group struggled to meet demand for its stationary bikes.
The forecasts were released during a conference call with analysts, and some investors had feared worse. Earlier, upon release of its fiscal third-quarter results, Peloton shares fell more than 4 per cent. During the earnings call, shares swung to a 5 per cent gain.
Treadmill customers have until November 2022 to return their machine for a full refund.