Peloton Interactive shares plunged on Thursday after a report that the company is suspending production of its home fitness equipment because of waning consumer demand.
According to CNBC, which cited internal company documents, Peloton next month will temporarily stop making its entry-level connected bike for a period of two months, and stop producing its basic treadmill for six weeks. The company doesn't plan to manufacture any of its pricier Tread+ machines in fiscal 2022, the media outlet reported.
In May of 2021, Peloton recalled both its treadmill models after the death of a child was linked to the Tread+, as well as dozens of injuries in which people sustained broken bones, lacerations and abrasions. The previous month, the U.S. Consumer Product Safety Commission had warned users with children and pets to stop using the machines, citing multiple incidents of people and animals being pulled under the treadmill.
Peloton shares fell sharply after CNBC's report, and trading in the stock was briefly halted. It fell 24% on the day to close at $24.22, chopping more than $2 billion off the company's market value.
In a statement late Thursday, Peloton co-founder and CEO John Foley denied that the company is halting all production of bikes and Treads. However, he did confirm that Peloton is evaluating its structure and the size of its team.
Peloton said in a confidential presentation this month that demand for its exercise equipment has declined because of consumer concerns over the machines' prices and growing competition from other connected fitness companies, according to CNBC.
Best known for its home-workout bike, outfitted with a screen that lets subscribers watch live or videotaped classes while cycling, Peloton introduced the Tread+ in 2018. With an avid customer base, the company went public in 2019 and saw its stock soar to as high as $167 in late 2020, as more Americans turned to exercising at home because of the COVID-19 pandemic.
By 2021, Peloton was growing fast, with revenues topping $4 billion. But profits remained elusive as the company sought to quickly expand its market share both in the U.S. and abroad, including expensive ad campaigns to promote the brand.
Peloton recalls treadmill02:34
Those efforts sparked controversy in December, when a reboot of the "Sex and the City" series featured a character from the show, played by actor Chris Noth, suffering a fatal heart attack after taking a spin class using one of its bikes.
Peloton is also facing operational challenges, including shortages of components and higher transportation costs, caused by supply chain disruptions around the world. Over the last year, the company's stock has tumbled 71%.
In its most recent quarter, Peloton reported losses of $376 million on revenue of $805.2 million. The company is scheduled to announce its second-quarter results on February 8.
Alain Sherter covers business and economic affairs for CBSNews.com.
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