Peloton pumps its brakes
Peloton’s popularity is falling as swiftly as it shot up.
Why it matters: Not all pandemic habits stick around. Peloton's trajectory over the past two years exemplifies how challenging it's been for companies to gauge shifts in consumer demand — particularly in sectors heavily altered by the pandemic.
Driving the news: Peloton is set to freeze production of its Bike and Tread equipment temporarily beginning next month, according to a CNBC report today.
- A Peloton spokesperson did not immediately respond to a request for comment. Its next earnings report is due Feb. 8.
- A few hours after markets closed on Thursday, the company published a preliminary look at earnings and letter from CEO John Foley to Peloton employees which said "Rumors that we are halting all production of bikes and Treads are false."
- "[W]e have identified a leaker, and we are moving forward with the appropriate legal action," the letter also reads. "As a public company that is in a pre-earnings 'Quiet Period', we are limited in what information we can share."
The reported plans shouldn’t come as a big surprise.
- Peloton admitted to overestimating demand for its machines and virtual classes back in November.
- The company has also been looking for other ways to cut costs — in the form of potential layoffs and store closings, CNBC reports.
What they're saying: "In the past, we’ve said layoffs would be the absolute last lever we would ever hope to pull," Foley said in his letter.
- At the same time, the company now has to "evaluate" its structure and size, he continued.
- "[W]e are still in the process of considering all options as part of our efforts to make our business more flexible," he said.
By the numbers: Peloton ended the September 2021 quarter with $805 million in revenue, a 14% quarterly decline.
- Its stock dropped as much as 25% today when news of the reported production pause hit.
Flashback: Peloton’s value in the market reached a record $49.3 billion in January 2021 when COVID cases surged.
- Around that time, the company said it couldn’t keep pace with demand and a few months later broke ground on a new factory.