Peloton Interactive plans to roll out more of its micro-stores as a way to reestablish its retail presence in a cost-effective manner.
The New York-based provider of high-end stationary exercise bicycles and treadmills on Thursday said the downsized store format that it tested in Nashville, Tennessee, has been a success. The fitness company plans to expand the concept — which is really more like a kiosk — to more locations in the first quarter of fiscal 2026, a spokeswoman told CoStar News in an email, though she declined to provide details.
When Peloton saw its revenue tumble in the wake of the pandemic, after Americans returned to their once-closed gyms, then-CEO Barry McCarthy's cost-cutting measures included slashing the company's fleet of store-showrooms. Many of them were in upscale malls paying high rents. But Peloton should have a brick-and-mortar footprint, company President and CEO Peter Stern said on the retailer's third-quarter fiscal 2025 earnings call.
"We need to meet members in more places," he told Wall Street analysts. "We talked about this. But we’ve been — to date — reducing our presence, for example, in retail. And we need to find ways now cost effectively to get back into retail."
At one point, Peloton had about 80 stores. “We continue to make progress reducing our retail showroom footprint and maybe have about a dozen or so [left],” the spokeswoman said.
Small-format parade
A wide variety of chains have been opening small-format stores to expand their physical footprints while minimizing overhead, a group that includes Macy's, Bloomingdale's, Ulta Beauty, Kohl's, Whole Foods Market and a soon-to-be-revived Bed Bath & Beyond. Peloton is following that trend, although its micro-store is much tinier than these other retailers' small-format locations.
In late October, Peloton said it would pilot its micro-store concept in Nashville. Later that year it debuted the location at the Mall at Green Hills at 2126 Abbott Martin Road. Peloton had closed the traditional store-showroom it previously had at that mall, according to Pelobuddy.com.
The Nashville micro-store is only 300 square feet compared to Peloton's largest one, which is roughly 6,000 square feet, according to the company spokeswoman.
"Our micro-store test in Nashville has been encouraging, as store revenue has outpaced the average of our other North America retail showrooms despite having one tenth the square footage," Stern said on the call. "We plan to bring on additional locations soon."
The location is not a storefront but more like a kiosk in one of the mall's hallways.
The micro-store has "a much more flexible lease commitment" and "exceeded our average North American retail showroom’s in-store engagement and revenue in Q3," Stern said in a letter to investors.
Third-party retail partners
Peloton has also struck deals to sell its bikes through third parties, including Amazon, Dick's Sporting Goods and Costco. And it is getting its equipment into gyms as well. That provides a "capital-light retail presence" in third-party locations, with "critical in-person touchpoints for prospective members to try our hardware products," Stern said in his letter.
"Third-party retail enables us to capture incremental hardware sales by meeting members where they already shop," he said. "Amazon’s seasonal sales events are a great example. In Q3, we observed year-over-year growth in hardware sales from the Amazon Big Spring Sale in the U.S."
In addition, Peloton has retained Pecor to provide installation and maintenance support on Peloton equipment in gyms, "given the exacting demands of gym operators and the duty cycles imposed on gym equipment," according to Stern.
"We’re also continuing to test new models to bring Peloton to gyms," he said. "In February, we opened a Peloton branded facility at the University of Texas at Austin."