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UPDATE 4-Peloton sees revenue below estimates, outlines steps to improve treadmill safety

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(Adds outlook, updates shares)

By Sanjana Shivdas

May 6 (Reuters) - Peloton Interactive Inc on Thursday forecast current-quarter revenue below Wall Street estimates, hurt by a $165 million hit from the recall of its treadmills following reports of multiple injuries and the death of a child in an accident.

Its annual revenue forecast of $4 billion came in slightly below estimates and lower than a prior outlook for $4.075 billion or more. It expects fourth-quarter revenue of about $915 million versus estimates of $1.17 billion.

In addition to offering a full refund on returns of its Tread+ and Tread treadmills, Peloton has said it will immediately halt further sales of the machines and waive monthly all-acccess subscriptions for both Tread+ and Tread members for three months.

Shares of the interactive fitness equipment maker erased earlier losses to gain 4.3% in extended trade after Peloton detailed its plans to tackle the recall.

CEO John Foley said Peloton would also postpone the U.S. launch of Tread, which was previously scheduled for May 27. He said the company was working with the U.S. Consumer Product Safety Commission (CPSC) to build an extra layer of safety features for Tread+, including a digital passcode to protect against unauthorized use.

It will also be developing more physical hardware to enhance the safety of Tread+.

Peloton had emerged as a pandemic winner, with its shares rocketing over fivefold in 2020 as home workouts became all the rage during prolonged lockdowns. But 2021 marked a shift in tone, with shares diving 45% amid multiple reports of the issues related to its treadmill.

Still, Peloton beat estimates for third-quarter results, with subscriptions at Connected Fitness, which includes interactive videos that stream live classes, more than doubling to about 2.08 million.

Investors are now closely watching how demand will holdup as vaccine rollouts in key markets allow fitness centres to gradually reopen and enthusiasts to train outside.

Net loss attributable to Class A and Class B shareholders narrowed to $8.6 million, or 3 cents per share, in the third quarter, compared with a loss of $55.6 million, or 20 cents per share, a year earlier.

Revenue rose 141% to $1.26 billion, beating analysts' estimates of $1.11 billion, according to Refinitiv data.

(Reporting by Sanjana Shivdas in Bengaluru; Editing by Devika Syamnath)