New • COVID-19 Report

Have gym closures given Peloton a sales boost?

Monday, April 20, 2020 • 12:00 PM EST

Key Takeaways:

1. Peloton is seeing tremendous top line growth, driven by new customer acquisitions, likely as a result of gym closures.
2. Younger men are purchasing the Peloton Bike at a much higher rate than before.
3. The company’s subscriptions are likely to see a massive surge throughout the summer, once the 90-day free trial for new customers comes to an end.

Peloton’s stock has been on fire as of late. The company continues to buck the broader market trend and is up nearly 79% since its initial fall in March. But is this hype speculative or rooted in facts?

A quick glance at recent sales suggests that the company has indeed witnessed a surge in orders in March, with Gross Merchandise Volume (GMV) nearly tripling in comparison to February.

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The burst in GMV is largely driven by a spike in orders for the company's flagship Peloton Bike, as Peloton Tread (the company's treadmill line) continues to contribute little to overall sales.

It's worth noting that Peloton Tread sales have been paused since March 18th due to the health risks associated with the "high-touch delivery requirements".

New customers spiked in mid-March, and have continued to grow at a more reasonable rate since then. The company is experiencing an all-time high in hardware purchases through April, in spite of the closure of its retail locations. This is driven by a strong ecommerce offering from the digitally native brand.

Food Delivery: Last 6 Months

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Food Delivery: Last 6 Months

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It’s also worth noting that Peloton’s customer mix has begun to skew to the youngest demographics, Gen Z. Under-25s, now make up nearly a quarter of new customers, a sharp increase from 5% prior to the pandemic.

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Food Delivery: Last 6 Months

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Orders from men have also seen an increase of 8% in comparison to prior months, now accounting for 43% of all purchases. This influx of younger, male-skewed customers is consistent with the theory that gym closures are like a major driver for Peloton’s growth, as younger men make up the largest segment of active gym-goers.

Food Delivery: Last 6 Months

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Food Delivery: Last 6 Months

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Now, Peloton’s GMV isn’t just about hardware sales. Many of Peloton’s most popular features (i.e. live metrics, classroom leaderboards, access to a larger inventory of classes) are only available to subscribers of the $13 or $39 “Memberships”. In fact, “Memberships” account for ~29% of Peloton’s revenue, according to their latest filings.

In March, active subscriptions were at an all-time high, and the churn rate was at an all-time low. This surge, largely driven by new customers, is likely understated because the company began offering a 90-day free trial as of mid-March. As a result, we expect to see a surge in subscription revenue throughout the summer.

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The subscription mix for the company has largely remained stable, with the $39 plan accounting for 90% of all subscriptions.