Is Peloton heading the way of the dinosaur? Things certainly don’t look good for the company after CEO John Foley announced Thursday that the company was making “significant corrective actions to improve profitability outlook.”
Foley said that the company’s reset will center mostly on improving profitability and optimizing costs in hopes of returning with a more focused Peloton.
“This work is still underway and we expect to have more details to share when we report earnings on February 8, 2022," said Foley.
According to documents reviewed by CNBC, Peloton’s halt is temporary, with the company pausing Bike production for two months. It's a move that follows a stop in production on the pricier Bike+ in December. The company is also stopping the production of its Tread treadmill machine for six weeks, beginning in February, and doesn’t anticipate producing any Tread+ machines in fiscal 2022.
"Notably, we’ve found ourselves in the middle of a once-in-a-hundred year event with the COVID-19 pandemic, and what we anticipated would happen over the course of three years happened in months during 2020, and into 2021," Foley stated in a company release.
"We feel good about right-sizing our production, and, as we evolve to more seasonal demand curves, we are resetting our production levels for sustainable growth."
As people were forced to work from home during the COVID-19 pandemic, the fitness market was one of the lucky niches to grow. Peloton saw its global revenue zoom from around $734 million in 2019 to $3.15 billion in 2021.
But with gyms reopening and demand for home fitness equipment considerably lower, Peloton’s losses are now mounting. The company has also landed in hot water with government regulators over the mishandling of a recall. Reports circulated that adult users, children, pets, and/or objects had been pulled under the rear of the company's treadmill, causing third-degree abrasions, broken bones, and even a fatality.
Then came Peloton’s unfortunate placement in the TV show "Sex and the City." When the new season premiered on Dec. 9, 2021, it brought with it the epic fail tale of Mr. Big, who suffers a fatal heart attack after a Peloton workout. The company’s stock dropped by more than 11% the day after the episode aired and even further the day after, adding to a single-year drop of more than 80%.
Consumers cite problems with equipment
The company might also have to take a closer look at how its customers value the return on investment they’re getting for their $39/mo. subscription.
“Customer service is terrible and several of them were very rude and never got back to me as they said they would,” Craig from Pawtucket, R.I., recently wrote in a ConsumerAffairs review.
Alexandra of Renton, Wash., wrote about being told by her doctor that an injury she suffered was connected, in part, to the stiffness of the pedals of her Peloton. She said the company would only reimburse her for about half of what she paid for the bike and not for any of the $2,000 in medical bills she incurred.
“I sent them all my proof of medical bills and letters and asked if I could return the bike and be refunded only for what I still owed on the bike. … I purchased it for $2,500 and still owe $2,100. They refused and said they would only pay me $1,300. So I would have to eat another $800 on top of what I already paid, not to count the thousands in medical bills for nerve damage caused by the machine!” she wrote.