Peloton to stop making bikes, treadmills in-house, outsources to Taiwan
Rexon Industrial Corp. will manufacture the Bike and Tread product lines
Peloton announced Tuesday that the company will no longer manufacture its bikes or treadmills in-house in an effort to reduce costs.
Instead, the high-end retailer, which benefited in the early days of the pandemic, will outsource its manufacturing to Taiwanese manufacturer Rexon Industrial Corp.
Rexon, which has previously worked with Peloton to produce hardware for its products, will become the sole manufacturer for both its Bike and Tread product lines, according to Peloton.
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The move is seen as a "natural progression in Peloton's strategy" as the company works to simplify its supply chain and optimize its cost structure, according to the company.
A Peloton exercise bike is seen after the ringing of the opening bell for the company's IPO at the Nasdaq Market site in New York City, New York, U.S., September 26, 2019. (REUTERS/Shannon Stapleton / Reuters Photos)
"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 CEO Barry McCarthy said in a statement.
Peloton also announced that it will be suspending operations at its Tonic Fitness Technology, Inc. facility through the remainder of the year. Peloton acquired Tonic in 2019.
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During the early days of the pandemic, Peloton thrived as its subscriber base soared from 700,000 to nearly 3 million. However, it hasn't been a smooth ride for the company ever since vaccines came out and COVID-19 restrictions eased, giving workout enthusiasts more workout options.
A detail shot shows the running deck of a Peloton Tread treadmill during CES 2018 at the Las Vegas Convention Center on January 11, 2018 in Las Vegas, Nevada. (Ethan Miller/Getty Images / Getty Images)
In February, the company announced a major restructuring and nixed plans to open its first U.S. factory, which would have employed 2,000 workers in Ohio. Co-founder John Foley stepped down as CEO, handing the reins over to McCarthy, and the company said it would cut nearly 3,000 jobs.
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Still, the company reported mounting losses in its third-quarter earnings report in May. In a letter to shareholders, McCarthy said Peloton ended the quarter with $879 million in cash, which he said left the company "thinly capitalized for a business of our scale."
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| PTON | PELOTON INTERACTIVE INC. | 8.36 | +0.42 | +5.29% |
He also said the company has to rethink its capital structure at the same time that it pushes to expand its subscriber base to 100 million.
The company ended the quarter with 7 million members.
The Associated Press contributed to this report.