Activist company

Peloton Fitness Equipment Company stops producing bikes and treads

The American fitness platform, the sports equipment manufacturer Peloton announced today that it will stop the production of bicycles and treadmills. Instead, the company will delegate production tasks to partners to simplify operations and reduce costs. The tasks will be entrusted in particular to the Taiwanese manufacturer Rexon.

The latter has managed to work with Peloton before. The Taiwanese company made hardware for its products. And now it will become the sole manufacturer for its Bike and Tread product lines.

“We believe this, along with other initiatives, will enable us to continue to reduce the cash burden on the business and increase our flexibility,” Peloton CEO Barry McCarthy said in a statement.

By the way, this fitness equipment and content made a lot of money during the outbreak. Its subscriber base has grown from 700,000 to nearly 3 million. However, that all changed when people started getting vaccinated and the government eased restrictions. As a result, Peloton’s inventory began to swell. So many users canceled subscriptions, causing Peloton’s business to plummet.

Peloton is losing a lot day by day

Today, its shares fell 1.8%, but then reversed and rose 1.4%. The reason is that Peloton has announced that it will extend its partnership with Rexon Industrial of Taiwan. As said, the latter will become the main manufacturer of its hardware products.

Earlier this year, under pressure from an activist investor, Peloton changed CEOs and announced price cuts and mass layoffs. Company CEO McCarthy warned in May that the company’s lack of capital, rising inventory and rising costs could result in huge losses in the quarter ending June.

Meanwhile, Peloton also said today that it will suspend operations at Tonic fitness facilities until the end of the year. As a reminder, Peloton acquired Tonic in October 2019.

McCarthy said in February they would focus on content. “Where the magic lives on Peloton’s digital screens, not on its connected bikes or treadmills.” Expanding digital community and improving content could make Peloton “a very fast-growing company with very high margins”

McCarthy also pointed out that it was “a connected fitness company, not a bike company”