Peloton problems?

Updated On: August 29, 2019
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Their recent S-1 filing could reveal a lot about Peloton's potential. Today, we dive deep into the Peloton IPO, plus our ProfitWell crew answers how much I’d have to pay them to part ways with their strongest team member.

 

 

Today's Top Subscription News


Lord & Taylor: Sold

Subscription retail gains more territory. Hudson's Bay, the Canadian business retail group, is selling Lord & Taylor to the clothing rental subscription service, Le Tote, for $100 million.

CNBC reported that this deal allows the department store chain to continue operations, since Lord & Taylor's Fifth Avenue store and others shuttered its doors earlier this year.

"We're excited to have reached an agreement with Le Tote that creates a new model for Lord & Taylor, bringing together fashion rental subscriptions with traditional retail," Hudson's Bay CEO Helena Foulkes said. 

Under the deal, Le Tote will acquire Lord & Taylor's brand/intellectual property, assume operations of 38 stores, digital channels, and inventory. 

CNBC reported Le Tote is still trying to process financing for the deal. If it is unable to obtain committed financing with 45 days of signing, Hudson's Bay can terminate the agreement.

Fitbit Dips Into SaaS Space

FitBit's future entails a new revenue strategy, Fitbit Premium, a $10 per month subscription service. According to TechCrunch, the offering also comes with an increased focus on health providers and enterprise.

This marks a big shift for Fitbit since its identity has been hardware-centric for the past decade. 

When Fitbit Premium rolls out this fall, expect guided programs, advanced insights, advanced sleep tools, and dynamic workouts.

Porn Star Martini Goes PG

ShortList released a juicy headline about a controversial drink name by Marks and Spencer. M&S's Porn Star Martini is changing its name because of getting flack for being "too sexual."

ShortList's article said, "M&S has been told that they must change the name of its tinned Porn Star Martini after it was said that the name could 'open the floodgates' to other suggestive names."

If you're a fan of this canned cocktail, no worries, you can enjoy it under its new name: Passion Star Martini.  

Deep Dive


Potential for Peloton Amid S-1 Filing

Following our coverage of the WeWork IPO, we’re taking a look at an entirely new realm, with the same controversial flair: streaming fitness. On August 27th we saw Peloton file for its IPO, revealing widening losses of $245.7 million on sales of $915 million, up from $47.9 mill from last year. 

The fitness company expects to raise $500 million in its offering, with its solid subscription of streaming fitness classes, which has expanded from stationary bike mogul to Peloton Tread treadmills. It said in the registration documents it plans to further expand its international foothold, which it cautioned will bring with it new costs.

And we spotted quite the intriguing thread by the self-dubbed “Inquisitive Investor” on Twitter, who claims Peloton might be reporting they’re in a better situation than they lead on. The thread begins: "Peloton subscriber churn looks to me to be around 20-30% per year. But they reported churn of 0.7%!!"

He then breaks down the math: because the reported churn is a 'monthly' churn, it’s calculated as net cancels in the period divided by 3 months. So 0.7% = 2.1% per quarter, or around 8.4%/yr. "But given the massive growth of the 500k+ subscribers we get to use in the denominator for churn, we added half those in the past 12 months. So we lost 8%+ of the 500K, but that 40-50k really applies to the 250k from last year." 

And then, the plot thickens.

He continues to explain that the IPO is exquisitely timed to occur just before lapses can really kick in from the phasing out of the 12 to 36 month lock-in subscription periods, per p. 67 of the S-1. So some large chunk of the historical "subscriptions" weren't even eligible for cancellation. Which means Peloton is "now losing subs at a rate of around 40-50k per year on an eligible base that is almost certainly way smaller than 200k, probably even 150k," suggesting they’re aiming to push their IPO before the metrics turn for the worse.

But a Yahoo! Finance article on the topic claims quite the opposite.

And it’s worth noting the Inquisitive Investor states he has no interest or position in Peloton, he simply likes analyzing investment metrics and statistics. His conclusions are his own assumptions and any & all readers must draw their own conclusions using their own analysis.

"I think the big thing is how they're going to unlock their expansionary revenue over time." - John Mangini, Peloton enthusiast & ProfitWell Pricing Strategist

Perhaps more of us need to get our butts back in the saddle, or Peloton could be riding off into the proverbial sunset, which is certainly not something we’d like to see.

Name Your Price


Name Your Price is a game during which players are prompted with questions of monetary value — reminiscent of childhood discussion: “How much would I have to pay you to lick the floor?” — but with prompts both bigger & bolder. Today, I’m joined by Tony Zhu, John Mangini, Devin Bhatia, and Brianna Van Tuinen, who answer how much I’d have to pay them to lose their strongest team member.


And that’s a wrap for your August 29th subscription news. We’ll catch ya back here tomorrow, where we do it all again. To recruit your friends into the subscription know, send them to recurnow.com to sign up for episodes on the daily.

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