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Peloton to pause production of its Bikes, treadmills as demand wanes

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Cari Gundee uses her Peloton to exercise at home in San Anselmo on April 6, 2020. Due to the coronavirus (COVID-19), more people turn to Peloton.

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PelotonAccording to CNBC internal documents, the company is suspending temporarily production of connected products for fitness because consumer demand has declined and to reduce costs.

The documents reveal that Peloton will halt production of Bike for two months from February through March. Peloton already stopped production of the more costly Bike+ in December, and it will continue to do so until June. Six weeks from now, it won’t be able to manufacture the Tread treadmill device. The documents also indicate that it has no plans to produce any Tread+ treadmill machines by fiscal 2022. Peloton previously stopped Tread+ production following a safety recall in 2017.

According to a company presentation on Jan. 10, the demand for its fitness products has been reduced around the globe due to price sensitivities and increased competitor activity.

Peloton is essentially incorrect about the number of people who will buy its products. This was after so much demand came forward the coronavirus pandemic. Now, it has thousands upon thousands of treadmills, cycles and other equipment in storage or on ships. The company needs to reset inventory.

Peloton has seen its market capital drop by nearly $40 billion over the last year, resulting in the planned production stop. In January, its market value soared to nearly $50 billion. But on Tuesday its shares tumbled to a 52-week low of $29.11 — nearly falling below the $29 mark, where it priced its initial public offering in September 2019. Peloton was trading at just $10 billion Thursday.

Peloton’s presentation showed that it had originally set expectations for the demand and delivery of its fiscal third and fourth quarters on October 31. However, these were far from realistic. The presentation shows that Peloton reevaluated its forecasts on December 14th. Accordingly to the presentation it saw significant drops in expectations for Bike, Bike+ or Tread.

Peloton explained that this forecast didn’t account for the impact on demand that might be experienced by the company when the new forecast is released. begins to charge customers an extra $250 in delivery and setup fees It will cost $350 for the Bike and $350 for the Tread. This month’s start is at end.

Peloton said that it had seen low email capture rates in preparation for its debut of the $495 Strength Training product. Peloton GuideCNBC saw internal documents and codenamed Project Tiger. Peloton tracks the number of users who sign up for email capture to obtain information about their product. This is an indication of “a challenging post-Covid market environment”, according to the company.

Guide’s official launch in the U.S.A was delayed from October last year to the following month, and could now come as late April as the presentation earlier this month stated. Peloton initially stated that it would charge $595 to purchase the bundle which includes one of its heart rate armbands. However, the price was later dropped by $100.

Peloton representatives declined to comment.

It is expected to report its fiscal second-quarter results on Feb. 8After the market closes.

Too many supply, too little spending

Peloton had faced this exact problem just a little longer than one year ago. Peloton was facing too many demands and insufficient supply. It declared its resignation in December 2020. a $420 million acquisition of the exercise equipment manufacturer PrecorIt now has more than 625,000 sq. feet of production space. This deal was concluded in early 2013.

In May of last year, Peloton said it would be spending another $400 millionIt plans to establish its first US factory for its treadmills and cycles. The Ohio plant is not due to open until 2023.

Recently, however, many gyms have reopened. However, consumers aren’t investing as much in at-home exercise equipment. Peloton had 2.49 million subscribers to its connected fitness network at the close of its most recent quarter. The company only gained 161,000 new subscribers in its Sept. 30-end period, which was the lowest in 2 years.

Its stock price shows the reversal. Pelton stock shares rose more than 4440% in 2020 but fell 76% by 2021.

CNBC was able to obtain a Peloton presentation that was made by an internal Peloton team in October 2021. The company stated it expected overall fitness spending to increase year after year. However, overall spending was flat during the summer months.

In recent weeks, analysts have been trimming their expectations for Peloton’s second quarter as well as their price targets for the stockPeloton’s holiday was weak, according to this projection.

Peloton may be losing market share

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