Peloton is temporarily halting production of its connected fitness products as customer demand declines and the company seeks costs, according to internal documents received through CNBC.
Peloton plans to suspend motorcycle production for two months, from February to March, according to the documents. He already stopped production of his most beloved Bike in December and will do so until June. You may not be making your Tread treadmill for six months. weeks, starting next month. And it does not plan to produce Tread machines in fiscal year 2022, according to the documents. Peloton had in the past halted production of Tread after a protective recall last year.
The company said in a confidential filing dated Jan. 10 that demand for its connected exercise device has faced a “significant reduction” globally due to buyers’ sensitivity to costs and increased competitor activity.
Peloton was necessarily wrong about how many other people would buy his products, after so many requests were made by the coronavirus pandemic. Now he discovers himself with thousands of cycles and conveyor belts in warehouses or on shipping ships, and has to restore his inventory. Levels
The planned production shutdown comes as nearly $40 billion has been cut from Peloton’s market cap over the past year. Its market price peaked at nearly $50 billion last January.
Platoon’s inventories closed down 23. 9% to $24. 22 on Thursday, raising the stock’s market cost to $7. 9 billion. During trading, inventories reached a 52-week low of $23. 25. The decline also brought inventory below $29, where its value was set before Peloton’s initial public offering.
The company’s filing shows peloton set oct. 31 expectations for orders and shipments in its fiscal third and fourth quarters, which turned out to be too high. He re-evaluated those predictions on Dec. 14, according to the filing, and Peloton’s expectations have dropped especially for its bike, bike and tread.
However, Peloton said, the most recent forecast doesn’t take into account the impact on the call for the company to only see when it starts charging consumers an additional $250 in shipping and installation fees for their bike, and an additional $350 for their tread. , starting at the end of this month.
Peloton also said low email capture rates were noted for the upcoming launch of its $495 bodybuilding product, Peloton Guide, codenamed “Project Tiger” in internal documents noted through CNBC. Email capture rates track the number of other people entering your email. Click on the platoon’s online page for product information. The company said it was a sign of “a more challenging call for the environment after Covid. “
The official launch of Guide in the EE. UU. Se delayed from last October until next month and could now take place until April, according to the presentation dated earlier this month. The company also said it first planned to charge $595 for the package that included one of Peloton’s centrally priced bracelets and then cut the price to $100.
On Thursday night, CEO John Foley said in a statement: “As we discussed in the last quarter, we are taking significant corrective action for our profitability outlook and optimizing our pricing across the company. This includes gross margins, moving to a more variable charge design and identification of discounts on our operating expenses as we build a more targeted platoon in the future. “
Foley added that Peloton will have more percentage when it publishes its fiscal second-quarter effects on Feb. 8 after the market closes.
Just over a year ago, Peloton faced exactly the opposite problem. There was too much demand and too little supply. In December 2020, it announced a $420 million acquisition of training equipment manufacturer Precor, giving it more than 625,000 square feet of production space. . This agreement was reached at the beginning of last year.
Then, last May, Peloton said it would spend another $400 million to build its first plant in the U. S. The U. S. to accelerate the production of its cycles and conveyor belts. This Ohio facility is expected to be operational until 2023.
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However, in recent months, gyms have reopened and consumers don’t seem to be investing as much money in home fitness equipment. At the end of its last quarter, Peloton had 2. 49 million connected fitness subscribers. It added only about 161,000 net subscribers. new members in the era ended on September 30, its slowest expansion in two years.
The reversal can be noticed in its percentage price. Pelton’s percentages increased more than 440% in 2020, but fell by 76% in 2021.
In a separate internal presentation from Peloton dated October 2021, which it received through CNBC, Peloton said it expects overall fitness spending to continue to grow year-over-year, but that overall spending will instead remain stable after the summer months.
In recent weeks, analysts have lowered their expectations for Peloton’s biggest quarter, as well as their value targets for stocks, forecasting peloton to have a weak vacation.
A positive point observed in the presentation was that Peloton’s percentage in the overall connected fitness market had increased.
But a report from research company M Science shows that Peloton’s overall market share could be declining. In November, Peloton’s percentage of all connected fitness products with a minimum value of $1,400 was below levels seen in 2019 and 2020, M Science said. That’s despite the buildup Peloton has noticed in the early holidays to buy groceries, adding Black Friday and Cyber Monday, he said.
M Science sets Peloton’s market share for products priced above $1400 at just over 65%, making it the leading player. Other home fitness products tracked through M Science include Echelon, Hydrow, Lululemon’s Mirror, NordicTrack and Tonal.
M Science also said it had not yet seen “any evidence of a wave of home fitness requests as a result of recent Covid-19 developments. “
CNBC reported Tuesday that Peloton is working with consulting firm McKinsey.
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