Peloton Interactive Inc (PTON.O) is temporarily suspending manufacture of its linked fitness bikes and treadmills, CNBC reported on Thursday, citing internal company documents.
Shares of the exercise bike manufacturer, which did not respond to a request for comment from Reuters, closed down 23 percent at $24, wiping out roughly $2.5 billion in market capitalization.
According to the CNBC story, Peloton stated in a confidential presentation dated Jan. 10 that it had noticed a “substantial decrease” in demand and expects to halt bike production in February and March. Additionally, it will suspend production of the Tread treadmill machine for six weeks beginning next month.
Peloton, once a media darling, reduced its full-year revenue prediction by much to $1 billion in November, as customers returned to gyms.
“During the pandemic, there was too little supply to meet the growing demand. Unfortunately, the company took those cues to bulk up supply just as demand began to falter,” BMO Capital Markets analyst Simeon Siegel said.
Peloton does not intend to manufacture any Tread+ equipment in fiscal 2022 and now has thousands of cycles and treadmills stored in warehouses or on cargo ships, according to the CNBC story.
Meanwhile, shares of gym operator Planet Fitness Inc (PLNT.N) increased by more than 4%. The corporation announced the opening of 110 to 120 new stores in November, following retail closures and operating restrictions caused by the epidemic.
Peloton was forced to recall its treadmills in May of last year after many injuries and the death of a kid were reported in an accident. Regulators in the United States are examining the corporation in connection with the injuries.
According to CNBC earlier this week, Peloton has been working with consulting firm McKinsey & Co on an assessment of its cost structure and may slash positions.