Peloton stock bounces back after CEO disputes reports of production halts


Peloton Interactive Inc. shares bounced back in after-hours trading Thursday, after Chief Executive John Foley combatted media reports claiming a production halt and layoffs.

Peloton PTON, -23.93% stock plummeted 23.9% in the regular session Thursday to fall lower than its IPO price for the first time in nearly two years, after CNBC reported that production on its exercise equipment would be halted after a decline in demand. Shares jumped nearly 10% in the extended trading session, however, after Peloton released preliminary earnings and a letter from Foley.

“This week, we’ve experienced leaks containing confidential information that have led to a flurry of speculative articles in the press,” Foley wrote in a letter sent to “the Peloton Team” and posted publicly. “The information the media has obtained is incomplete, out of context, and not reflective of Peloton’s strategy.”

Foley said that the company had “identified a leaker, and we are moving forward with the appropriate legal action.” He then addressed two important elements of recent media reports: layoffs, which Insider reported earlier in the week were in the works, and the production halt.

Foley called the report of a complete halt in production of Peloton’s stationary bicycles and treadmills “false,” and suggested that layoffs are not written in stone yet.

“We are still in the process of considering all options as part of our efforts to make our business more flexible,” he said of the possibility of layoffs, while saying the company is “resetting our production levels for sustainable growth.”

Peloton said that it expects to report fiscal second-quarter revenue of $1.14 billion, within its guidance range of $1.1 billion to $1.2 billion, with adjusted-Ebitda losses of $260 million to $270 million, better than the company’s guidance for adjusted losses of $325 million to $350 million.

In the release of the earnings information, Foley included a statement that said Peloton executives are, as stated in first-quarter earnings, “taking significant corrective actions to improve our profitability outlook and optimize our costs across the company.”

“This includes gross margin improvements, moving to a more variable cost structure, and identifying reductions in our operating expenses as we build a more focused Peloton moving forward,” he wrote.

While the company is still struggling with waning demand for its equipment, Foley stressed in his letter that customers were still using their equipment and maintaining their subscriptions to content. Peloton has long sold itself as the rare exercise-equipment maker that is not fully dependent on selling more equipment, as it collects recurring revenue from users who subscriber to exercise classes.

“This past quarter, our churn rate was 0.79%. This means that our members are sticking with us,” he wrote.

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