Peloton’s Bad News Gets Worse

The CEO of Peloton Interactive Inc. (NASDAQ: PTON) seems to think he has a handle on the exercise bike maker’s deep problems. That really isn’t so. Revenue collapsed 28% in the most recently reported quarter to $679 million. The company lost over $1.1 billion. Investors reasonably asked whether the company is in a liquidity crisis. And the problems have just gotten worse.

CEO Barry McCarthy said that how people view the quarterly results depends on where they sit. There are no seats from which the results can be viewed as anything but a deepening crisis. He also said that, among employees, “everyone’s at their station.” That does not include the 2,800 people McCarthy has laid off this year. He has indicated that Peloton cannot cut its way to profits. It appears he actually believes otherwise.

McCarthy has held his job since February. The stock is down over 70% this year. One has to ask why the board has hung onto him, other than it would look bad to push him out so quickly. It might erode investor confidence more, although that is impossible.

Peloton has to extend the time for the filing of its annual report. Its accounting firm, Ernst & Young, cannot complete the audit. According to The Wall Street Journal, the company blamed problems on “internal control.” In part, that means Peloton will need to consider the value of its assets. Changes in future plans, and their effects on balance sheet items, also may be questioned. McCarthy did not have anything to say about the problem, although he has been outspoken about most of the company’s other crisises.

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McCarthy has been in his job long enough that he can no longer look to poor decisions by earlier management. The ship is his now, and he has done nothing to keep it from sinking.

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