The US fitness platform, sports equipment manufacturer Peloton announced today that it would stop the production of bicycles and treadmills. Instead, the company will delegate production tasks to partners to simplify operations and cut costs. Particularly, the tasks will be handed over to the Taiwanese manufacturer Rexon.
The latter has managed to work with Peloton previously. The Taiwanese company produced hardware for its products. And now, it will become the sole manufacturer for both its Bike and Tread product lines.
“We believe that this along with other initiatives will enable us to continue reducing 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 epidemic. Its subscriber base soared from 700,000 to nearly 3 million. However, everything changed when people began getting vaccines and the government eased relevant restrictions. As a result, Peloton’s inventory began to swell. So many users canceled subscriptions, causing Peloton’s business to plummet.
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Today, its shares fell as much as 1.8%, but then bucked the trend and rose 1.4%. The reason is that Peloton has announced that it would extend its partnership with Taiwan’s Rexon Industrial. As said, the latter will become the main manufacturer of its hardware products.
Earlier this year, under pressure from an activist investor, Peloton changed its CEO and announced price cuts and massive layoffs. The company CEO McCarthy warned in May that the company’s lack of capital, rising inventories, and rising costs could lead to huge losses in the quarter ending in 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 that they would focus on content. “Where the magic lives is on Peloton’s digital screens, not its connected bikes or treadmills.” Expanding the digital community and enhancing content could make Peloton “a very fast-growing business with very high margins’”
McCarthy also emphasized that it is “a connected fitness company, not a bike company”