Peloton is not halting production of its bikes and treadmills but is “right-sizing” production, Peloton co-founder and CEO John Foley said in a Jan. 20 memo to Peloton staff that addressed media reports alleging the opposite. The reports also speculated about layoffs, which Foley did not as definitively dispute.

On the same day of the letter, Peloton released preliminary second quarter fiscal 2022 (ended Dec. 31, 2021) results showing total revenue of approximately $1.14 billion vs. the company’s previous guidance of $1.1 billion to $1.2 billion. This compares to its second quarter 2021 revenue (three-month period ended Dec. 31, 2020) of $1.06 billion, which was a 128 percent increase from the same period in 2020.

The company’s preliminary EBITDA in second quarter 2022 was a loss in the range of $270 million to $260 million, which compares to guidance of a loss of $350 million to $325 million.

“Rumors that we are halting all production of bikes and Treads are false,” Foley wrote in the letter that the company posted to its website.

Foley posed that the COVID-19 pandemic had sped up the projected three-year demand for its products to just months in 2020 and 2021, an acceleration that the company met “head-on,” he added. The company even purchased Precor in early 2021 for $420 million to help with production of Peloton products.

“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,” Foley wrote.

Someone leaked to CNBC a Jan. 10 confidential presentation, which CNBC shared in a story, the details of which were then picked up by other press. The articles caused the company’s shares to fall 24 percent to $24.22. At one time in the past 12 months, the company’s shares had been trading as high as $166.57. After Foley’s memo refuting parts of the story and after release of the preliminary second quarter results, shares climbed 9 percent in late trading on Jan. 20. It ended the day on Jan. 21 at $27.06 per share.

In January 2021, as the company was riding high on pandemic demand for its at-home products, Peloton’s valuation was $50 billion. Today, its valuation is about $8 billion, according to Bloomberg.

“The information the media has obtained is incomplete, out of context, and not reflective of Peloton’s strategy,” Foley wrote.

The company has identified who leaked the information and is pursuing legal action, Foley said.

The CNBC story also said that layoffs were coming at Peloton, and Bloomberg reported that some layoffs have already occurred at Peloton stores (some of which are rumored to be closing), online sales and technical support.

Foley was not definitive in denying reports of possible layoffs.

“In the past, we’ve said layoffs would be the absolute last lever we would ever hope to pull,” he wrote in the memo to employees. “However, we now need to evaluate our organization structure and size of our team, with the utmost care and compassion. And we are still in the process of considering all options as part of our efforts to make our business more flexible.”

He also wrote: “I am SO proud of everything we have accomplished together, and it pains me we are faced with these tough decisions. I know this is difficult, and I want to thank you for your patience as we work through these times together.

Last quarter, the company said it was taking “significant corrective actions” to improve its profitability outlook and optimize its costs across the company, Foley said in the preliminary financial release.

“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,” he said. “This work is still underway, and we expect to have more details to share when we report earnings on Feb. 8, 2022.”

CNBC reported that the company had paused manufacturing of its Bike+ in December with plans to resume in June, that it would pause manufacturing of its other bikes from February to March, and that starting in February, it would pause production of its Tread treadmill for six weeks and its Tread+ treadmills through fiscal 2022.

Peloton has faced multiple other issues during the past year. As gyms reopened after temporary shutdowns due to the COVID-19 pandemic, sales of Peloton’s products slowed causing the company to cut its annual revenue forecast by $1 billion.

The company recalled its Tread and Tread+ treadmills in May 2021 after a child died allegedly after being sucked under the treadmill and after reports surfaced of other children and pets being injured on the products. Several lawsuits ensued from parents of the injured children as well as some shareholders alleging fraud related to the company’s reporting of the injuries.

In August 2021, the company shared that the U.S. Department of Justice and the Department of Homeland Security had subpoenaed the company for documents and information related to its reporting of the death and injuries.

And a character in the “Sex and the City” movie sequel died of a heart attack after using a Peloton bike while a character on the Showtime series “Billions,” survived a heart attack he suffered while riding a Peloton bike.

In November, Peloton filed lawsuits against Echelon Fitness Multimedia LLC and iFit Inc., alleging infringement on some of its patents.

In September, Peloton said it was expanding its presence into the hospitality marketwith its new Peloton Commercial portfolio that includes the original Peloton Bike and Precor’s catalog of strength and cardio equipment.

Disclaimer:

The information contained in this article is for educational and informational purposes only and is not intended as a health advice. We would ask you to consult a qualified professional or medical expert to gain additional knowledge before you choose to consume any product or perform any exercise.

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