Peloton loses $2.5 bln in market value after report on production pause

Jan 20 (Reuters) – Peloton Interactive Inc (PTON.O) is temporarily halting production of its connected fitness bikes and treadmills after a significant drop in demand, CNBC reported on Thursday, citing internal documents from the company.

Shares in the exercise bike maker, which did not respond to a Reuters request for comment, closed down 23% at $24, wiping off nearly $2.5 billion in market cap.

In a confidential presentation dated Jan. 10, Peloton said it had seen a “significant reduction” in demand and that it plans to pause bike production in February and March, according to the CNBC report. It also won’t manufacture the Tread treadmill machine for six weeks, beginning next month.

Peloton, once a pandemic darling, slashed its full-year sales forecast by up to $1 billion in November, as people began venturing out of their houses to hit gyms again. read more

“During the pandemic, there was too little supply to meet the growing demand. Unfortunately, the company took those cues to bulk up supply just as demand began to falter,” BMO Capital Markets analyst Simeon Siegel said.

Peloton is not looking to produce any Tread+ machines in fiscal 2022 and has thousands of cycles and treadmills lying in warehouses or on cargo ships, the CNBC report added.

Meanwhile, shares in gym chain Planet Fitness Inc (PLNT.N) jumped more than 4%. The company announced 110 to 120 new store openings in November, emerging from the pandemic-induced store closures and operational restrictions.

In May last year, Peloton was forced to recall its treadmills following reports of multiple injuries and the death of a child in an accident. U.S. regulators are investigating the company over the injuries. read more

Peloton has been working with consulting firm McKinsey & Co for a review of its cost structure and could cut jobs, CNBC had reported earlier this week. read more

Reporting by Kannaki Deka in Bengaluru; Additional reporting by Nathan Gomes and Aishwarya Nair in Bengaluru
Editing by Vinay Dwivedi

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