Following a “silent time,” Peloton CEO John Foley took a pause to address several stories about the company’s weak device sales ahead of the company’s quarterly results on March 1. The CEO denied that the business is stopping manufacturing across its whole bicycle and treadmill range, even though demand for the equipment has started to dwindle due to gym re-openings in recent months.
Foley writes the following under the heading “Rumors that we are halting all production of bikes and Treads are false”: “[W]e’ve found ourselves amid a once-in-a-hundred-year event with the COVID-19 pandemic, and what we anticipated would happen over three years happened in months during 2020 and into 2021.”
We worked fast and tirelessly to meet the demand head-on at a time when the world desperately needed us, in large part as a result of the tremendous amount of effort you put in daily. We are pleased with our decision to right-size our output, and as we transition to more seasonal demand curves, we are resetting our production levels to achieve long-term growth.
To accompany preliminary results, Foley issues a supplementary statement in which he states: “As we mentioned last quarter, we are taking major corrective efforts to enhance our profitability outlook and optimize costs across the organization.” This includes increasing our gross margins, shifting to a more variable cost structure, and seeking opportunities to reduce our operational expenditures as we continue to construct a more focused Peloton going ahead, among other things.
He says that the company hopes to offer further details on the changes when it publishes its profits on February 8. Among those efforts was “right-sizing” manufacturing in response to lower demand – but the executive was cautious about denying reports that production on all four of the company’s bicycle/treadmill gadgets would be halted for weeks or months at a time.
A study by consulting firm McKinsey revealed that the company was reorganizing and laying off employees. Foley admitted this as well. For the many previous years, he says, “we have said that layoffs would be the very last lever we would ever want to pull.” “However, we must now assess our organizational structure as well as the size of our workforce with the greatest care and compassion,” says the leader. As part of our attempts to make our company more adaptable, we are currently in the process of evaluating all available possibilities.”
In the wake of increased adoption during those mentioned above “once in a hundred-year event,” such stories have been seen as an indication that Peloton went too far with their strategy. The announcement comes after the company’s stock price plummeted by 76 percent last year, after an enormous spike in 2020, fueled by pandemic-related demand.