[News Inside] From Fitness Enthusiast Salaryman to Nasdaq Cinderella... Is the Success Story Coming to an End?

John Foley, Founder and CEO of Peloton

▲John Foley, CEO of Peloton

[Asia Economy Reporter Kwon Jaehee] 'The company loved by Biden,' 'The Cinderella of Nasdaq'

This is the story of Peloton, a representative company that benefited from COVID-19.

Peloton's founder and CEO, John Foley, graduated from Georgia Tech with a degree in Industrial Engineering and later earned an MBA from Harvard University. He then worked as a factory engineer at confectionery company Mars and served as vice president of e-commerce at bookstore chain Barnes & Noble.

He suddenly started his own business while raising children. CEO Foley is known as a big fan of the health club franchise 'SoulCycle,' which has a club-like atmosphere. SoulCycle, centered in New York, is popular among models, celebrities, and career women, and gained fame as Lady Gaga, Michelle Obama, and David Beckham were known to attend.

Foley founded Peloton while struggling to find time to go to the gym due to dual-income parenting and raising two children. Peloton, which means 'a group of cyclists riding together' in French, took a full year to develop its innovative bicycle.

Founded in 2012, Peloton did not receive any investment from investors for several years after its establishment. Peloton's unique feature is that although users exercise alone at home, the connected device creates a feeling of exercising together with others. It not only sells physical indoor bikes but also offers indoor exercise classes through a subscription model. Because of this, it earned the nickname 'Netflix of home workouts.' However, in the early days, when explaining this service, people dismissed it, saying, 'Is there such a thing?'

Peloton rose as the 'Cinderella of Nasdaq' thanks to the COVID-19 pandemic. When shutdowns were imposed and people could no longer go to gyms, they turned to Peloton as an alternative. In July last year, sales surged by 250%, gaining explosive popularity. Demand even outpaced supply, leading Peloton to announce that it would not hold discount events during Black Friday, a peak sales period for companies. This decision was made because they were already struggling to handle the influx of orders, with deliveries delayed by several months, and they feared that increased demand during the year-end shopping season starting with Black Friday would cause further delays and disappoint customers. Particularly, the fact that U.S. President Joe Biden is known as a Peloton user also influenced the company's popularity.

Peloton's revenue model mainly consists of two parts: sales of equipment such as bikes, and monthly subscription sales of fitness class content. Peloton offers over 5,000 classes including cycling, running, walking, strength training, meditation, and yoga. Even without a Peloton bike, users can take classes through the application (app).

Since customers who purchase the high-priced bike, costing about $2,000 (approximately 2.34 million KRW), are unlikely to easily cancel the $39 monthly subscription service, Peloton's revenue structure is considered stable.

For this reason, Peloton was expected to continue growing steadily even after COVID-19, but its stock price plunged nearly 30% after disappointing earnings were announced recently.

On the 4th (local time), Peloton reported Q1 2022 (July-September 2021) earnings with sales of $805.2 million (approximately 954.5 billion KRW). This sharply contrasts with the 250% sales surge recorded in the same period last year.

Net income, which means pure operating profit after excluding other expenses, recorded a loss. Peloton posted a net income of $69.3 million in the same period last year but recorded a net loss of $376 million this time.

Because of this, voices questioning the rosy future of Peloton, which rose as the 'Cinderella of Nasdaq' thanks to the COVID-19 boom, are growing louder in the market.

Simeon Siegel, an analyst at investment bank BMO Capital Markets, said, "What Peloton has achieved is remarkable, but its growth trajectory is not infinite."