In this articlePTONFollow your favorite stocksCREATE FREE ACCOUNTClothing inside a Peloton store in Palo Alto, California, US, on Monday, Aug. 5, 2024. David Paul Morris | Bloomberg | Getty ImagesPeloton posted a surprise profit for its fiscal fourth quarter on Thursday and outlined its strategy to return to growth under new CEO Peter Stern. Shares rose in premarketing trading, swinging between gains of between 5% and 15%.The connected fitness company, known for its stationary bikes and treadmills, posted a net income of $21.6 million, compared with a loss of $30.5 million in the year-earlier period. That’s thanks to better than expected sales but also, Peloton’s efforts to cut its operating expenses, which Stern said in a letter to shareholders remain too high. In fiscal year 2026, which began in July, the company plans to reduce run-rate expenses by another $100 million, on top of the $200 million it cut in fiscal 2025. Half of those cuts will come from indirect costs, like renegotiating contracts with suppliers, but the other half will come from cutting 6% of its staff, the company said. “Our operating expenses remain too high, which hinders our ability to invest in our future,” Stern wrote in the letter to shareholders. “We are launching a cost restructuring plan intended to achieve at least $100 million of run-rate savings by the end of FY26 by reducing the size of our global team, paring back indirect spend, and relocating some of our work. This is not a decision we came to lightly, as it impacts many talented team members, but we believe it is necessary for the long-term health of our business.”The latest round of layoffs comes just over a year after the company announced plans to cut 15% of its staff.For the most recent quarter, Peloton beat Wall Street expectations on the top and bottom lines. Here’s how the company did in its fourth fiscal quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:Earnings per share: 5 cents vs. a loss of 6 cents expectedRevenue: $607 million vs. $580 million expectedThe company’s reported net income for the three-month period that ended June 30 was $21.6 million, or 5 cents per share, compared with a loss of $30.5 million, or 8 cents per share, a year earlier. Sales dropped to $607 million, down about 6% from a year earlier.Ever since its pandemic heyday, Peloton has been working to cut costs, stabilize its business and generate free cash flow to ensure its business can survive. Eight months into Stern’s tenure as Peloton’s latest top executive, those efforts are starting to bear fruit. For the full year, the company generated $320 million in free cash flow, ahead of its own internal expectations, and its guidance implies a path to revenue growth in the back half of the year. Overall, operating expenses were down 25% in fiscal 2025, with meaningful cuts to sales and marketing as well as research and development, metrics investors and analysts have long said were too high for the size of Peloton’s business.For the fiscal fourth quarter, operating expenses were down 20% compared to the same quarter a year prior, led by a 28% decline in sales and marketing expenses, a 20% drop in research and development costs and a 33% decline in general and administrative costs.Peloton has also made strides in …
