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Peloton hints at cuts after report of falling demand for stationary bikes | manufacturing sector

Peloton is considering staff cuts and production changes as investors hit its share price after a report said it was considering halting production of its exercise bikes due to a drop in demand.

The company’s chief executive, John Foley, told a CNBC report claiming that it plans to temporarily halt production of its exercise bikes and treadmills was “incomplete, out of context, and did not reflect Peloton’s strategy.”

However, Foley said in the message to the 3,200 employees of Peloton that the company needed to “assess” the size of its workforce and indicated that production restrictions are on the way, as it referred to “restoring” manufacturing.

The CNBC report cites internal company documents, and Foley said in a blog post published Thursday that “we have identified a leaker and are moving forward with appropriate legal action.”

He added: “In the past, we’ve said layoffs would be the absolute last lever we’d expect to pull. However, we now need to assess the structure of our organization and the size of our team, with the utmost care and compassion.”

Describing the halt to all bike and treadmill production as “bogus,” Foley later said the company would be “restoring” production levels, acknowledging that there was an increase in demand for Peloton gear when lockdowns were introduced. Covid at the beginning of the pandemic. However, the relaxation of restrictions around the world has seen exercise habits return to gyms and outdoor activities. This week, UK Prime Minister Boris Johnson announced the lifting of guidance on working from home, a big driver of demand for home exercise equipment, in England.

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“We feel good about sizing our production right, and as we move to more seasonal demand curves, we are readjusting our production levels for sustainable growth,” Foley said.

Peloton shares fell 24% on Thursday following the CNBC report, which said the company plans to pause bike production from February to March and its Tread treadmill for six weeks starting next month. CNBC quoted a January 10 presentation in which the company said it was facing a “significant reduction” in demand around the world as a result of price sensitivity (its bikes start at £1,350 in the UK) and a increased competition.

Peloton had said on Thursday that it was taking “significant corrective action” to improve its profitability and estimated second-quarter revenue to be around $1.14bn (£840m), compared with its previous forecast of $1. 1 billion to $1.2 billion.

“During the pandemic, there was too little supply to meet the growing demand. Unfortunately, the company took those signals to increase supply just as demand started to falter,” said Simeon Siegel, an analyst at BMO Capital Markets.

Peloton has been working with consulting firm McKinsey & Co on a review of its cost structure and could cut jobs, CNBC reported earlier this week.

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