Ahead of the company’s upcoming earnings, Peloton CEO John Foley took a break from a “quiet period” to address a number of reports related to poor device sales. The executive issued a denial that the company is halting production across its entire bicycle and treadmill line as demand for the devices has begun to crater amid gym re-openings.
Under the heading, “Rumors that we are halting all production of bikes and Treads are false,” Foley writes:
[W]e’ve found ourselves in the middle of a once-in-a-hundred year event with the COVID-19 pandemic, and what we anticipated would happen over the course of three years happened in months during 2020, and into 2021.
We worked quickly and diligently to meet the demand head-on at a time when the world really needed us, in large part thanks to how hard you worked every day. 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.
In a separate statement tied to preliminary earnings, Foley states:
As we discussed last quarter, we are taking significant corrective actions to improve our profitability outlook and optimize our costs across the company. 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 adds that the firm expects to share more information around the moves when Peloton reports its earnings on February 8. Those actions included “right-sizing” production, in response to decreased demand – though the executive was careful to push back on reporting that production on all four of its bicycle/treadmill devices will halt for weeks or months outright.
Foley also acknowledged reports of restructuring and layoffs, following a report from consulting firm, McKinsey. “In the past, we’ve said layoffs would be the absolute last lever we would ever hope to pull,” he writes. “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.”
Such reports have been seen as confirmation that Peloton overplayed its hand amid increased adoption during the aforementioned “once-in-a-hundred year event.” The news comes after the company experienced a 76% drop in shares last year, following an astronomical rise in 2020, on the strength of pandemic demand.