Peloton suspends production of its bikes and treadmills as demand dwindles

According to internal documents obtained by CNBC, Peloton is temporarily suspending production of its connected fitness products as consumer demand slows and the company seeks to control costs.

According to the documents, Peloton plans to suspend bike production for two months, from February to March. He already stopped production of his more expensive Bike+ in December and will do so until June. She will not produce her Tread treadmill for six weeks starting next month. According to the documents, the company does not plan to produce Tread+ machines in fiscal 2022. Peloton had previously stopped production of the Tread+ following a product recall last year.

The company said in a confidential January 10 presentation that demand for its connected fitness equipment has seen a “significant decline” worldwide due to price sensitivity and increased competitive activity.

Peloton has essentially guessed wrong how many people will buy its products after demand spiked during the coronavirus pandemic. Now he has thousands of bikes and treadmills sitting in warehouses or on cargo ships and needs to reset his inventory levels.

The planned shutdown comes as Peloton’s market capitalization has shrunk by nearly $40 billion over the past year. Its market value peaked at nearly $50 billion last January. But its shares fell to a 52-week low of $29.11 on Tuesday, nearly falling below the $29 mark at which it priced its September 2019 initial public offering.

On the news, Peloton shares fell over 20%, bringing the stock’s market value to $8.3 billion and hitting a 52-week low of $23.25 before trading was halted.

The company’s presentation shows that on October 31, Peloton initially set expectations for demand and supply in the third and fourth financial quarters, which turned out to be too high. According to the presentation, on December 14, the company revised those forecasts, and Peloton’s expectations were significantly reduced for the Bike, Bike+ and Tread bikes.

However, according to Peloton, the latest forecast does not take into account any impact on demand the company could see when it starts charging customers an additional $250 for shipping and installation of their bike and another $350 for their tread starting from the end. this month.

Peloton also said it has experienced low email capture rates with the upcoming debut of its $495 strength training product, the Peloton Guide, which is codenamed “Project Tiger” in internal documents viewed by CNBC. Email capture metrics tracks the number of people who enter their email addresses on the Peloton website for product information. The company said it was a signal of “a more challenging post-COVID demand environment.”

The official launch of Guide in the US has been pushed back from last October to next month and could now take place as early as April, according to a presentation earlier this month. The company also said it originally planned to charge $595 for the kit, which includes one of Peloton’s heart rate bands, and later cut the price by $100.

A Peloton spokesperson declined to comment.

The company plans will report results for the second financial quarter on February 8. after market close.

Too much supply in the form of fixed costs

Peloton’s market share may shrink

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