Peloton, the fitness fitness trainer, is in the grip of the pandemic

Peloton Interactive Inc. was the darling of the pandemic a year ago this week.

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The stock hit an all-time high in January 2021 - sending its market value near $50 billion after stuck-at home consumers flooded the company with orders. Peloton had recently introduced a new exercise bike and was preparing for a push into more affordable treadmills. In some cases, its fitness instructors had become celebrities, pulling in half a million dollars in annual compensation.

In the 12 months that followed, nearly everything that could go wrong did. The company botched the roll out of its lower-cost treadmill, having to recall both that model and an older version due to safety problems. The higher-end treadmill, linked to accidents and a child's death, never went on sale again. As lockdowns eased, many consumers embraced gyms and used their Peloton bikes less often.

Sales slowed, and Peloton slashed its annual forecast by about $1 billion. The product that everyone wanted and no one could get was suddenly felt like a passing fad.

On Thursday, a report from CNBC said that the company was temporarily halting production of its bikes and treadmills. Peloton said later in the day that it was trying to reduce costs, including making cuts to jobs and operations, but pushed back on the idea that it was idling factories to save money.

In a memo to staff, Chief Executive Officer John Foley said rumors that we are halting all production of bikes and Treads are false. He said that out-of- context information had given the wrong impression and that the company identified the leaker. We are moving forward with the necessary legal action. The situation was a stunning reversal from just months ago when Peloton couldn't build enough equipment and customers sat on long waiting lists.

The shares fell 24% to $24.22 on Thursday, bringing their decline over the past 12 months to 84%, according to the CNBC report. Peloton's market value is less than $8 billion, putting it above the airlines and cruise operators that it had eclipsed during the Pandemic.

Foley's comments provided some comfort for investors, with the stock recovering more than 9% in late trading. The preliminary quarters were in line with analysts estimates, and the company released preliminary quarterly results that were nearly in line with analysts estimates.

Simeon Siegel, analyst at BMO Capital Markets, said that the decisions being made are likely the right ones. That means that it is no longer a growth story. It is a company that focuses on cost cutting. The company recently hired McKinsey Co. to evaluate its business and costs. The current and former Peloton personnel, who asked not to be identified, believe that store closures are looming and morale has suffered. Some of the retail employees, online sales and technical support teams have been let go.

Peloton is delaying the opening of a $400 million US factory by the end of the year, according to the New York Post. The facility, located in Ohio, will be open in 2024 instead of in 2023, according to the newspaper. That could save $100 million to $200 million. Peloton said last year that it would bring a good portion of our manufacturing to the United States soil. The company's image has also taken a hit. In December it was killed off by HBO Max's Sex and the City reboot, killing a Peloton-riding character. Chris Noth played Mr. Big after a 45-minute ride in the show's first episode, he drops dead from a heart attack.

The incident hurt Peloton's stock, and investors were already so jittery. Analysts said a fictional death was unlikely to affect sales, though Siegel wondered if the company had lost control over its storytelling, perhaps its greatest achievement to date. Peloton tried to regain the upper hand by casting Noth in a commercial with one of its fitness instructors, Jess King. The ad had to be pulled after Noth's sexual assault allegations appeared in the Hollywood Reporter.

The company is aiming to rebound from a tough year by introducing new products, including a strength-training device called the Guide. The expansion beyond its signature bikes may be slow going. The internal documents indicate that interest in the Guide has not been as high as expected, according to CNBC. The company has been working on a rowing machine, and acquired Precor in April to push into the commercial fitness equipment market.

As life starts to return to normal in many parts of the world, customers appetite for home fitness has waned - and Peloton isn't alone in suffering. On Thursday, Nautilus Inc. fell 8.3% as investors fretted about a broader slump.

Peloton slashed its sales forecast in November, sending the stock on its worst rout ever. It has been facing increased competition from companies like Apple Inc., which has a fitness digital workout service that has been gaining traction.

The outlook doesn't look brighter now, months after the forecast reduction. Peloton said in a presentation from Jan. 10 that its fitness equipment faced a significant reduction in demand globally due to shoppers being more price sensitive and competition ramping up, according to CNBC.

That suggests a key piece of Peloton's recent strategy - convincing the world that it is not just a luxury product for the elite that hasn't caught hold yet. The basic model still costs $1,500, but the company has cut the price of its bikes. It doesn't include the accompanying fees for online access to its classes and content.

Peloton s president said in August that it was making inroads with people under the age of 35 who make less than $50,000 a year. The bikes are a niche product, especially without the Pandemic lock downs, because of the current slump.

When demand is faltering, it is harder to ignore what was otherwise glossed over, said Siegel, who has the equivalent of a sell rating on Peloton.

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