Apparently, Mr. Big wasn’t the only one [redacted[ by Peloton in the past few weeks. According to paperwork obtained by CNBC, the $1.8B exercise equipment company was set to put a temporary stop on any further production.
Reportedly per CNBC, consumer hesitation due to increased competition, a slowdown in the demand of its gear, and a reduction in the pandemic-induced “workout-from-home” trend were cited as reasons for the decision.
However, CEO John Foley promptly issued a statement to shoot down any such rumors. “The information the media has obtained is incomplete, out of context, and not reflective of Peloton’s strategy,” he wrote. “It has saddened me to know you read these things without the clarity and context that you deserve. Before I go on, I want all of you to know that we have identified a leaker, and we are moving forward with the appropriate legal action.”
Peloton was not going to manufacture any more of its standard Bikes for the next two months, according to the documents, and it would also halt work on the line of Tread treadmills for six weeks as of February. The company has already paused production on its more expensive Bike+ last month, and it apparently would make no more through June 2022.
“As we discussed last quarter, we are taking significant corrective actions to improve our profitability outlook and optimize our costs across the company,” Foley said in a previous statement. “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.”
Peloton’s market cap plunged more than $10 billion last November due to poor market performance in 2022, which was not helped by the widespread recall of its treadmill in May. In fact, the company doesn’t expect to be back in the black until next year. Foley’s own net worth dropped by $376 million around the same time, according to Forbes.
Allegedly, the company also reached out to the consulting firm McKinsey in order to turn the ship around. The unnamed source told CNBC that layoffs, firings, and store closures are soon underway, and some staff from Peloton’s sales division have already been let go.
But Foley made sure to address this issue as well in his recent statement. “[W]e’ve said layoffs would be the absolute last lever we would ever hope to pull,” he wrote in today’s media release. “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.”
Peloton was reportedly going to increase the margin on its products, too. Per the leaked audio, the company planned to raise the prices of its equipment while getting rid of free delivery and setup. The strategy was intended to slash costs yet boost Peloton’s bottom line at the same time. “It’s part of a broader move within the organization,” chief commercial officer Kevin Cornils is said to have revealed. “We’re looking to get gross margin between 25 and 30% on our products.”
The initiative was supposedly named “Project Phoenix.”
But Foley has rebutted the whole matter as a farce with one short header: Rumors that we are halting all production of bikes and Treads are false.
Read John Foley’s statement about what the media has right and wrong regarding Peloton’s future by clicking here.