Pandemic darling Peloton is scrapping its manufacturing operations as part of the struggling at-home exercise company’s massive cost-cutting effort, the firm said Tuesday.
The stationary bike and treadmill maker, which had rushed to expand its manufacturing capabilities during the pandemic only to watch demand fall off a cliff, will outsource all of its manufacturing to longtime Taiwan partner Rexon Industrial Corp.
“Today we take another significant step in simplifying our supply chain and variablizing our cost structure – a key priority for us,” said chief executive Barry McCarthy in a statement. “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’s shares were up nearly 6% on the news to more than $9 — still a fraction of its pandemic highs when the stock hit $162.
McCarthy had conceded during an earnings call in May that the company is “thinly capitalized for a business of our scale.”
The former Spotify and Netflix executive succeeded Peloton co-founder and former CEO John Foley in February and has since axed a massive $400 million manufacturing facility in Ohio that was supposed to handle orders that never materialized.
As part of the Rexon outsourcing arrangement, Peloton suspended its Tonic Fitness Technology manufacturing facility for the rest of the year. Peloton acquired the Taiwan-based company in 2019 for $47.4 million to make some of its equipment.
McCarthy has been on a cost-cutting mission since stepping into the CEO role after Foley was asked to step down.
He chopped about 20% of corporate jobs — 2,800 — and slashed the price of its equipment in an effort to spark sales. At the same time, he increased the monthly price of Peloton’s subscriptions to $44 from $39.
