Nov 5, 2019 - Economy

Peloton deal doubles as trade war protection

Illustration: Sarah Grillo/Axios

Peloton on Tuesday disclosed that it paid nearly $50 million to purchase Tonic Fitness, one of its two bike manufacturing partners in Taiwan.

Why it matters: The deal is officially about helping Peloton better control its supply chain, but CEO John Foley tells Axios it also could help the company protect itself in case of future trade tensions.

"We aren't in China meaningfully, and are very comfortable with Taiwan, but this gives us more transparency into our upstream supply chain ... So we have more optionality if we find ourselves in the position of considering stateside manufacturing."
ā€” John Foley

Peloton on Tuesday beat Wall Street estimates on both the top and bottom lines for its first fiscal quarter of 2020, but shares nonetheless fell on continued losses.

What's next: Foley says the company will continue to focus on growth over profits, but acknowledges that it's "pulling back on little things at the margin."

  • For example, it abandoned plans for a 30-second Super Bowl ad that would have cost between $3 million and $6 million.
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