Peloton is ending the in-house production of exercise bikes that have gained enthusiastic support from connected fitness companies. The latest strategic rethinking follows a sharp reversal of its economic fate.
The New York-based group has announced that it will shut down Tonic Fitness Technology, a Taiwanese manufacturing facility that it acquired for about $ 45 million within three years. Rexon Industrial, another Taiwanese company that has been working with us for several years, will be the leading manufacturer of Peloton bicycles and treadmills.
Former Netflix and Spotify executive Barry McCarthy, who took office as CEO in February, sees this move as a natural advance in a strategy that simplifies the company’s supply chain and focuses on software and content rather than hardware. I drew it. To improve its profit margin.
“We believe this, along with other initiatives, can continue to reduce the cash burden on our business and increase its flexibility,” he added.
In May, Peloton said it ended its third quarter with unlimited cash and cash equivalents for only $ 879 million, and McCarthy said the cash outflow “weak market capitalization” for a business of the same size. I admitted that I was in a state.
As McCarthy seeks to reduce its annual costs by $ 800 million by 2024, it has raised $ 750 million in new debt from lenders such as Blackstone and Apollo. However, his stock was below $ 9 per share and the stock valuation was reduced to $ 3 billion from its peak. Nearly $ 50 billion in late 2020, when investors wanted a pandemic-fueled surge in home exercise.
When Peloton dominated Tonic shortly after its listing in 2019, co-founder John Foley pursued ambitious growth goals and further dominated the supply chain the moment he told the board that the company was possible. I proposed an acquisition as a method. One day it’s worth $ 1 trillion.
In 2021, Foley began construction of a $ 400 million manufacturing facility in Ohio, and in the face of concerns about the risks of the war over Taiwan, U.S. production accelerated its growth and “to help us sleep better.” It will be. ” Since then, I have abandoned the site.
Andy Rendich, Peloton’s Chief Supply Chain Officer, said in a statement that Rexon is “a proven partner in our global operations” and more than 100 Peloton staff in Taiwan are “important in our engineering and manufacturing strategy.” It will continue to play a role. ” “.
