Peloton hits brakes on production as sales stall
Peloton Interactive lost more than 25 per cent of its value on Wall Street at one point last night after the exercise bike maker said that it was temporarily pausing production of its connected fitness products as demand wanes and it looks to control costs.
In a confidential presentation dated January 10, Peloton reported a “significant reduction” in demand and said that it planned to suspend bike production in February and March, according to CNBC.
It also will not manufacture its Tread treadmill machine for six weeks, beginning next month, while production of the more expensive Tread+ machines will not be resumed in this financial year. Peloton declined to comment.
Once a stock market star, Peloton cut its full-year outlook by up to $1 billion in November, saying that demand for its exercise bikes and treadmills was slowing more sharply than expected. At the time Jill Woodworth, 48, chief financial officer of the company, told analysts: “It is clear that we underestimated the reopening impact on our company and the overall industry.”
Peloton now expects annual sales of between $4.4 billion and $4.8 billion, compared with $5.4 billion previously. Analysts have warned of a tough path ahead for the company as people begin venturing out of their homes.
Locked-down consumers turned to its pricey kit and exercise subscriptions to keep active, leading its stock price to quadruple last year. Rishi Sunak, the chancellor, is said to be a fan and to use a Peloton bike as part of his morning exercise routine.
Peloton was founded in 2012 by John Foley, 50, a former Barnes & Noble executive, and four associates. They wanted to offer people an equivalent to a studio-based cycling class in their homes. The company sold its first bike in 2013 and was listed in New York two years ago at $29 a share when it raised nearly $1.2 billion.
It was one of the earlier winners of Covid-19 and reported a 250 per cent sales rise in the first quarter of 2020. The sugar rush has faded, however, and the company’s reputation was tarnished last year when regulators issued an urgent warning over a treadmill after the death of a child.
Peloton shares closed down $7.62, or 23.9 per cent, at $24.22 in New York last night, valuing it at $8 billion.
