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Peloton CEO Calls Report Claiming the Company Is Halting Production False

Peloton CEO Calls Report Claiming the Company Is Halting Production False..  Peloton co-founder and CEO John Foley late Thursday said a media report that claimed the company is halting all production of its bikes and other connected-fitness products amid lower demand from consumers was false.

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Peloton CEO Calls Report Claiming the Company Is Halting Production False
Peloton CEO Calls Report Claiming the Company Is Halting Production False—

CNBC, citing internal documents from the company, published an article earlier Thursday that said Peloton wouldn’t manufacture its bikes throughout February and March, halt output of its Tread treadmill beginning next month for six weeks, and produce no Tread+ machines in fiscal 2022. According to CNBC’s report, the company, in a confidential presentation dated Jan. 10, blamed increased competition and consumers balking at the high price of its home fitness gear.

The report sent shares of Peloton Interactive (ticker: PTON) into a free fall. The stock tumbled 29% to $24.22 Thursday. Shares rebounded 9.4% in after-hours trading to $26.50.

Foley denied the report in a letter sent to Peloton employees that was published on the company’s press site. “The information the media has obtained is incomplete, out of context, and not reflective of Peloton’s strategy,” he wrote.

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The CEO also said the company is assessing ways to adapt the business, including layoffs. “In the past, we’ve said layoffs would be the absolute last lever we would ever hope to pull. However, we now need to evaluate our organization structure and size of our team, with the utmost care and compassion,” Foley wrote.

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Foley added:

Notably, we’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.

With Americans unable to hit the gym, Peloton thrived during the pandemic. Shares of the company reached a record high of $167.42 on Jan. 13, 2021.

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The New York-based company bet big on consumers looking for at-home fitness. In April, it closed on its acquisition of Precor, a large commercial fitness equipment provider, for $420 million in cash. And in May, it announced plans to build its first U.S. factory, saying it will open in 2023.

But now, Peloton is wrestling with reduced demand as more consumers have been able to return to the gym.

In November, Peloton disappointed investors when it reported a fiscal first-quarter net loss of $1.25 a share on revenue of $805.2 million. Wall Street’s estimate called for a net loss of $1.10 a share from revenue of $808.7 million, according to FactSet.

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Peloton pre-released preliminary second-quarter earnings Thursday. The company anticipates revenue of approximately $1.14 billion, in line with consensus estimates tracked by FactSet and previous guidance of $1.1 to $1.2 billion.

“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,” Foley wrote in the release.

The company reports its second-quarter earnings on Feb. 8.

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