Peloton pushes back at production pause report after shares plunge

Peloton has pushed back at a report that it plans to temporarily stop production of its exercise machines.

The company's shares plunged by more than 20% after the CNBC report, which cited internal documents.

In a blog, the firm's chief executive said the information was "incomplete, out of context, and not reflective of Peloton's strategy".

Peloton saw sales soar during the pandemic as people were forced to stay at home due to lockdowns.

The firm, which pairs its equipment with streaming and live exercise classes, had struggled to keep up with orders at the start of the pandemic, as gyms shut their doors.

More recently, however, appetite has dwindled for its bikes and treadmills, which start at nearly $1,500 (£1,100).

"We worked quickly and diligently to meet the demand head-on at a time when the world really needed us," Peloton's co-founder John Foley said on the company's website.

"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."

In a separate statement issued with the company's quarterly earnings Mr Foley said: "As we discussed last quarter, we are taking significant corrective actions to improve our profitability outlook and optimize our costs across the company.

"This includes gross margin improvements, moving to a more variable cost structure, and identifying reductions in our operating expenses as we build a more focused Peloton moving forward."

Accident investigation

The firm was hit last year after the death of a child in a treadmill accident led to a recall and government safety investigation. It also cut prices as people started to return to pre-pandemic exercise habits.

In November, it told investors it had experienced "softer than anticipated" sales and was lowering its expectations for the year.

CNBC reported that Peloton was halting production of its most expensive expensive bike from December until June and its most expensive treadmill for all of its 2022 financial year, which runs through June. It is also pausing production of its standard bike in February and March and its treadmill for six weeks.

CNBC, which also reported that the firm is considering job cuts, said the presentation blamed increased competition and price sensitivity for a "significant reduction" in demand.

The news sent the price of Peloton shares below $29, which is below what they fetched when the loss-making firm floated on the stock market in 2019. The value of the shares are down roughly 80% over the last 12 months.

At the time, analysts said it was not clear how big the market for Peloton machines was given their cost. The firm also makes money from people who subscribe for classes via its app.