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Indoor fitness brand Peloton is to stop manufacturing its bikes and treadmills in-house and within the US, and will instead outsource the process to Taiwan and existing partner Rexon.
The New York City-based brand saw booming sales in 2020 as the COVID-19 pandemic led to governments in key markets including the US and UK impose lockdown measures, leading people to undertake exercise at home.
Just 18 months ago, the company was one of the darlings of Wall Street as its share price, buoyed by soaring sales and the business going into profitability for the first time in its history, soared to nearly six times what it had been when it went public in 2017.
Ambitious growth plans were announced, including setting up a factory in Ohio to reduce its dependency on overseas suppliers.
The growth in sales and profits proved unsustainable, however – due also in part to increased competition in connected fitness – and turnover has crashed, with the company also back in the red, resulting in founder John Foley stepping down from his position as CEO.
The plans for that factory in the US have now been shelved, and the company has made thousands of US-based employees redundant.
> Peloton’s parting gift to 2,800 employees it just fired? A year’s free membership …
Floated on NASDAQ exchange in September 2019 with an initial share price of $29, Peloton shares hit a high of $162.72 on Christmas Eve 2020.
However, they are now trading at around one twentieth of that value, with shares trading at an all-time low of $8.42 at the time of writing.
To put that into context … you may remember the company’s 2019 pre-Christmas advert, which was widely slammed for being sexist.
> When ads backfire – what went wrong with THAT Peloton spot?
The 30-second spot showed a husband gifting a Peloton bike to his wife, who then dutifully rode it throughout the following 12 months before giving him a video the following Christmas showing her using it during the year.
A better present to him may have been buying him the equivalent sum in Peloton shares – $2,000 – that the bike would have cost him 12 months previously.
Those shares – assuming he’d held on to them – would be worth around $100 right now.
The company’s Chief Supply Chain Officer, Andy Rendich, put a brave face on its latest news, saying: “We are thrilled to be expanding our partnership with Rexon, a leading Taiwanese manufacturer with over 50 years of experience.
“Rexon has been with Peloton for many years and is a proven partner for our global operations.
“We plan to maintain a significant corporate and manufacturing presence in Taiwan with over 100 Peloton Taiwan team members who continue to play a key role in our engineering and manufacturing strategy.”
CEO Barry McCarthy added: “Today we take another significant step in simplifying our supply chain and variablizing [No, really – ed] our cost structure – a key priority for us.
“We believe that this along with other initiatives will enable us to continue reducing the cash burden on the business and increase our flexibility. P
“Partnering with market-leading third party suppliers, Peloton will be able to focus on what we do best – using technology and content to help our 7 million Members become the best versions of themselves.”
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