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Peloton stock plunges following report it will halt production

CNBC, citing internal documents, says the company will hit pause amid slowing demand for its bike and treadmill

A Peloton bike for sale at in Dedham, Mass., last year. (Adam Glanzman/Bloomberg News)

Peloton stock lost about a quarter of its value Thursday after CNBC reported that it would halt production of its signature connected bikes and treadmills amid slowing demand.

Citing internal documents, the news outlet said the company would pause production of its Bike for two months starting in February. It will extend an earlier production freeze on its more expensive Bike+, and it won’t produce its Tread treadmill for six weeks, CNBC reported.

The stock pared some of its losses before falling again. It closed at $24.22, down nearly 24 percent. The share price has tumbled 84 percent the past year.

Late Thursday the company published a letter chief executive John Foley had written to employees, in which he criticized “leaks containing confidential information that have led to a flurry of speculative articles in the press." He added that the company had identified a leaker is moving forward with legal action.

In the letter Foley said: “rumors that we are halting all production of bikes and Treads are false," although he did hint at production changes.

“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,” Foley wrote.

Peloton was among a cadre of fitness-minded companies that benefited in the early days of the pandemic as consumers looked for new ways to work out at home. It ended 2020 playing offense, as it announced a $420 million acquisition of the equipment maker Precor that would add some 625,000 square feet of manufacturing space, including factories in North Carolina and Washington state.

But the company’s fortunes took a turn in 2021 as large swaths of the workforce returned to the office and in-person gyms. Sales cratered. And those who already owned Pelotons began using them less: The company’s average number of monthly workouts per subscriber dropped from 26 to 16 over three quarters, according to a letter to shareholders.

The company ran a net loss of $376 million on revenue of $805 million in the quarter ended Sept. 30, 2021.

It projected sales from $4.4 billion to $4.8 billion in the year ending June 30, a guidance that was edited down by roughly $1 billion from a previous estimate. It releases its next quarterly results on Feb. 8.

In its November earnings call, executives said its Tread treadmill would be a growth engine for it moving forward despite the return to gyms and an earlier product recall, and the company launched a fall marketing campaign to hype the product.

Meanwhile, the company is looking to cut costs to improve its financial condition over the next year. In a Nov. 4 call with investors, Chief Financial Officer Jill Woodworth said Peloton would make “significant adjustments to hiring plans” across the company, as well as revamp its product development teams and showrooms.