Peloton says treadmill recall will lower fourth-quarter sales by $165 million

A detail shot shows the running deck of a Peloton Tread treadmill during CES 2018 at the Las Vegas Convention Center on January 11, 2018 in Las Vegas, Nevada.

Ethan Miller | Getty Images

Peloton said Thursday it expects its fiscal fourth-quarter sales to take a $165 million hit due to a treadmill recall.

It has halted sales of the machines globally and will be delaying an upcoming launch of its less-expensive treadmill in the United States until further notice.

Peloton also said it expects to incur costs because it is offering customers full refunds and will also waive membership fees for all of its current treadmill customers for three months.

"Our goal is to have the best safety features for treadmill products on the market," Chief Executive John Foley said during an earnings call. "There will be a short-term financial impact due to the steps we're taking."

The company expects the combined costs to reduce fourth-quarter adjusted EBITDA by about $16 million.

It has updated its fiscal fourth-quarter sales outlook to be about $915 million. Analysts had been calling for $1.12 billion, according to Refinitiv estimates.

Peloton shares were up more than 4% in after-hours trading, as investors gathered more clarity on the fitness equipment maker's forecast.

Peloton now anticipates full-year revenue to be $4 billion, inclusive of the contributions from its recent Precor acquisition and taking into account the treadmill refunds and returns. Analysts had been looking for $4.1 billion.

A day earlier, Peloton issued a voluntary recall of all treadmills, after one child died and dozens others were injured in accidents involving its machines. The recall affects about 125,000 Tread+ machines and roughly 1,050 Tread products in the U.S.

"I think the Tread will be coming back to market much sooner than the Tread+," Foley said Thursday.

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