Peloton loses US$2.5b in market value after report on production pause

[BENGALURU] Peloton Interactive is temporarily halting production of its connected fitness bikes and treadmills after a significant drop in demand, CNBC reported on Thursday (Jan 20), citing internal documents from the company.

Shares in the exercise bike maker, once a pandemic darling, closed down 24 per cent at about US$24, wiping off nearly US$2.5 billion in market value.

Late on Thursday, Peloton said it was taking "significant corrective actions" to improve its profitability and estimated second-quarter revenue to be about US$1.1 billion, compared with its previous forecast of US$1.1 billion to US$1.2 billion. The company, however, did not comment on the production pause report.

According to the CNBC report, Peloton, in a confidential presentation dated Jan 10, said it had seen a "significant reduction" in demand and that it planned to pause bike production in February and March. It also won't manufacture the Tread treadmill machine for 6 weeks, beginning next month.

Peloton has seen a slump in demand for its fitness classes and equipment as people venture out of their houses to hit gyms again.

"During the pandemic, there was too little supply to meet the growing demand. Unfortunately, the company took those cues to bulk up supply just as demand began to falter," BMO Capital Markets analyst Simeon Siegel said.

Peloton is not looking to produce any Tread+ machines in fiscal 2022 and has thousands of cycles and treadmills lying in warehouses or on cargo ships, the CNBC report added.

In May last year, the company was forced to recall its treadmills following reports of multiple injuries and the death of a child in an accident. US regulators are investigating the company over the injuries.

Peloton has been working with consulting firm McKinsey & Co for a review of its cost structure and could cut jobs, CNBC had reported earlier this week.

REUTERS