Peloton May Start Cutting Jobs And Stop Production

According to documents obtained by CNBC, it looks like Peloton will soon take drastic measures to control costs and account for declining demand.

Peloton CEO John Foley acknowledged Thursday that the company is “considering all options,” including layoffs and production curbs, after a report that the fitness firm has stopped manufacturing its bikes and treadmills sent shares crashing.

His statement did not reference any specific report but said “rumors that we are halting all production of bikes and Treads” were “false.”

Foley’s statement came hours after CNBC reported that from February, Peloton plans to pause production of its $1,495 lower-end bike for two months and stop making Tread machines for six weeks, citing internal documents. The more expensive “Plus” version, introduced just over a year ago, will be halted until June. 

Demand for Peloton’s controversial treadmills appears to be just as dire: Its cheaper treadmill, the $2,495 tread, won’t be manufactured for six weeks starting in February.

 According to CNBC, not a single Tread+ will be produced in fiscal 2022, ending June 30. 

While Foley did say in his statement that the company is “right-sizing” production in response to “seasonal demand curves.”

“We are resetting our production levels for sustainable growth,” he added.

According to internal documents CNBC says it viewed, company executives face a “significant reduction” of demand for Peloton products because of its high prices and increased competition.

Foley’s statement also alluded to potential job cuts. “In the past, we’ve said layoffs would be the absolute last lever we would ever hope to pull,” he said. “However, we now need to evaluate the organizational 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.”

Peloton shares sank nearly 24% Thursday on the CNBC report, its worst day in more than two months.

In his statement, Foley said that “leaks” of “confidential information” have “led to a flurry of speculative articles in the press.” He called the information obtained by the media is “incomplete, out of context, and not reflective of Peloton’s strategy.” He added the company has identified a leaker and is “moving forward with the appropriate legal action.”

Peloton has attributed some of its issues to inflation and supply chain challenges. Starting Jan. 31, customers will be required to pay $250 for delivery and setup for Peloton’s $1,495 bike — a service that the company previously included in the price. Customers buying Peloton’s Tread treadmills will be charged a $350 fee for delivery and installation starting later this month.

“Continued constraints are driving up costs,” the company said. That announcement came just months after Peloton cut the price of its original at-home exercise bike drastically to boost sagging sales.

In its most recent earnings report, the company revealed that sales of its stationary bikes and treadmills fell 17%. Those two machines are the company’s bread and butter, making up 60% of its business.

Shares are down 32% for the year. Peloton reports earnings on Feb. 8.