Updated Jan 21, 2022 - Economy & Business

Peloton pumps its brakes

Data: FactSet; Chart: Axios Visuals
Data: FactSet; Chart: Axios Visuals

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. 

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.
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