Peloton Pauses Production on Bikes, Treadmills

It's the latest in a string of bad news for one of the pandemic's early success stories.

Peloton bike in San Francisco, Nov. 19, 2019.
Peloton bike in San Francisco, Nov. 19, 2019.
AP Photo/Jeff Chiu, File

NEW YORK (AP) — Peloton's shares tumbled on Thursday after a media report said the exercise and treadmill company was temporarily halting production of its connected fitness products amid waning consumer demand.

Shares fell nearly 24%, or $7.62 to $24.22 on Thursday on the report.

Peloton Interactive Inc. plans to pause production of its main stationary bikes for two months, from February to March, according to CNBC, citing internal documents. The news site said that it already halted production of its more expensive Bike+ in December and will do so until June. It won’t manufacture its main treadmill machine for six weeks, beginning next month. And it doesn’t anticipate making any of its more expensive Tread+ treadmill machines in fiscal 2022, according to CNBC.

The move is the latest in a string of bad news for Peloton, which was one of the early pandemic success stories. In May, it halted production of its Tread+ treadmills, after recalling about 125,000 of its treadmills less than a month after denying they were dangerous. One was linked to the death of a child, while others were linked to injuries of 29 others.

Last August, the company cut the price of its main stationary bike — the product that was the cornerstone of its original popularity — by $400 because of slower revenue growth.

In November, the company slashed its annual sales outlook, noting it expected annual sales of $4.4 billion to $4.8 billion in fiscal 2022, which ends in June. It originally had expected $5.4 billion.

The turn of events have battered Peloton's stock. Shares have fallen 84% in the past 52 weeks.

In a statement released hours after the report broke, John Foley, co-founder and CEO of Peloton, said that as discussed last quarter, the company was “taking significant corrective action" to improve profitability and optimize its costs. That includes improving gross margins, moving to a '"variable cost structure" and cutting operating expenses.

Foley said the New York-based company will offer more details when it reports its fiscal second-quarter results on Feb. 8, which covers the quarter ended Dec. 31, but it provided preliminary results.

It said it expects to report $1.14 billion in total revenue versus its guidance of $1.1 billion to $1.2 billon. It also said that it expects earnings before interest, taxes, depreciation and amortization to be in the range of a loss of $260 million to a loss of $270 million. It had originally expected a loss ranging from $325 million to $350 million.

Peloton sales spiked as quarantined Americans bought at-home exercise equipment as a way to stay fit. And it couldn't keep up with demand. But its success has created additional competitors who sell cheaper bicycles and exercise equipment. In addition, many high-end gyms are offering virtual classes that once were Peloton’s biggest draws. And in recent months, Americans are returning to their local gyms.

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