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It may not be physically possible to do a U-turn on a stationary bike, but Peloton found a way how.
The troubled fitness equipment manufacturer announced Tuesday that it won't build bikes and treadmills anymore, outsourcing the task to one of its leading suppliers. It's a startling reversal that comes less than a year after Peloton broke ground on, and since canceled, a $400 million manufacturing plant in Ohio.
Peloton traditionally divided manufacturing between partner suppliers and its own facilities, which notably included a Taiwanese facility it acquired for $45 million in 2019. But traditions at the company have gone out the window this year -- Peloton co-founder John Foley stepped down under activist pressure in February, the company laid off 3,000 employees, and a 24% sales dip to $964 million in the latest quarter cemented its first year-over-year revenue decline since going public in 2019.
Peloton's new CEO Barry McCarthy previously laid out strategies to turn around the company's business and reduce dependency on hardware revenue, which went stale after gyms reopened. Much of those plans involve doubling down on the company's software and marketing its exercise app independent of equipment. The decision to out-sourcing manufacturing, meanwhile, could help stabilize cash problems:
Fortune Untold: According to a Financial Times report last year, in October 2020 Foley told a client event hosted by Goldman Sachs that Peloton would become "one of the few $1 trillion companies." Today, its stock is less than $9 a share and its $3 billion equity valuation pales in comparison to a near $50 billion peak in 2020.
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