Interactive Peloton Inc.
said the company is reviewing its workforce size and resetting production levels as the company adjusts to more seasonal demand for its exercise equipment.
A memo from CEO John Foley was sent to Peloton employees on Thursday following a report that Peloton was temporarily halting production of its connected fitness products. The report sent shares of the company down 24%.
CNBC reported that the company will suspend production of Bike in February and March and suspend production of its Bike+ until June, citing internal documents. Peloton will not manufacture its Tread treadmill for six weeks, starting next month, CNBC reported.
“The information the media has obtained is incomplete, out of context and does not reflect Peloton’s strategy,” Mr. Foley said in his memo to employees. He added that the company had identified who leaked the information and said Peloton was “moving forward with appropriate legal action.”
Mr Foley added: “We are happy with the right size of our production and as we move towards more seasonal demand curves we are resetting our production levels for sustainable growth.
Late Thursday, the company reported preliminary second-quarter revenue of $1.14 billion, which was in line with the company’s forecast. The company also said it had 2.77 million connected fitness subscribers, slightly below its guided range. Peloton reported an adjusted loss before interest, taxes, depreciation and amortization of between $260 million and $270 million, which was a lower adjusted loss than it expected.
Shares of the company closed Thursday at $24.22. Shares are down more than 80% in the past 12 months and more than 70% in the past three. The company’s market value fell from over $50 billion to less than $10 billion.
Peloton, which has signed up millions of customers for its digital fitness classes, is struggling with slowing demand for its equipment. He warned investors last year that his annual sales would miss company expectations by 20% and that he was looking for ways to cut costs.
In Thursday’s memo, Foley told employees that the company’s previously announced cost-cutting review would likely lead to job losses. “We said the layoffs would be the absolute last lever we hoped to pull,” he wrote. “However, we now need to assess the structure of our organization and the size of our team.”
As of June 2021, the New York-based company employed more than 6,700 people in the United States and hundreds more overseas.
Mr Foley told staff that demand for the company’s online fitness classes was still strong, adding that the churn rate over the past quarter was 0.79%, meaning most members were sticking to the monthly subscription. “In fact, just a few days ago, we recorded our highest number of daily workouts – over 2.9 million workouts,” he wrote.
The company’s monthly net churn was 0.76% in the same quarter of 2020.
Peloton ramped up production in early 2021 as it rushed to keep up with orders earlier in the pandemic as people shifted to home workouts. But as people started working out in gyms again, demand for his machines cooled. Peloton slashed its bike prices by around 20% last year, but recently started charging customers for installation and delivery of some of its products.
In December 2020, Peloton agreed to pay $420 million to acquire Precor Inc., one of the world’s largest manufacturers of fitness equipment, and announced plans in early 2021 to build a $400 million factory in Ohio.
Peloton has previously said it believes the company has the right capability and is taking “significant corrective action” to improve profitability in the coming quarters. After posting a quarterly loss, Peloton announced a $1 billion stock offering in November.
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