The Real Reasons Behind Peloton’s Big Problems

By Joseph Farago | 2 weeks ago

peloton

A shift in executive power has led to the exposure of Peloton’s supply chain issues. When current CEO Barry McCarthy took over the role three months ago, he had no idea what issues were plaguing the bike company. Soon after starting his position, McCarthy uncovered the supply chain disruption issues, the overabundance of inventory, and dwindling funds.

McCarthy announced his frustration about the company in his post-earnings conference call last week. He stated that a massive issue with the company was with the supply chain but that the most surprising problem was the minimal cash coming into Peloton. Sales were drying up left and right after a year of skyrocketing purchases. Now that people were deciding to look outside the home for a workout routine, bikes and treadmills were sitting dormant in Peloton’s manufacturing warehouses. Now, the current CEO has a lot to do to change the company’s downward trajectory.

McCarthy has had previous executive experience working at both Netflix and Spotify. Though he wasn’t appropriately prepped about Peloton’s financial difficulties, his prior experience working at both tech corporations stabilized his thinking and allowed him to strategize for the bike company’s future. He did add in his conference call that he was pleased with Peloton’s quick turnaround regarding the cash flow situation. He stated his appreciation for specific tactics the bike company has enforced to gain back profits without hindering its investors and shareholders. McCarthy also addressed his admiration for fellow executives at Peloton, adding that the team was full of competent people.

But as much as McCarthy talks about his excitement for the Peloton team, it won’t bump sales back up to what they were previously in quarantine. The bike company hit a fortunate high in 2020 and 2021 when many consumers needed at-home equipment to complete their workouts safely. Now that mask mandates have dropped, and many people are returning to their gym memberships, the necessity for personal bikes and treadmills has fallen drastically. While McCarthy praised his co-executives, his conference call was also filled with unpleasant statistics about Peloton’s stock devaluation.

Though Peloton is providing considerable discounts on many of its overstocked bikes, stock prices have plummeted immensely. McCarthy’s letter to shareholders disclosed unsatisfactory sales for its first 2022 quarter, which ended March 31st. The devaluation foreshadows another depressing quarter for the company, to the dismay of Peloton shareholders. Fortunately, McCarthy has identified problems in past management for the company and has laid out specific strategies to boost sales again.

Peloton has suffered an immense revenue decrease from its all-time high in 2021. The company’s market value dropped to $4 billion this March, far lower than a year ago. At the beginning of 2021, Peloton was valued at $50 billion, a massive difference from its value today. Still, McCarthy remains optimistic about the bike company, confident that he can turn around the plummeting sales and regain its profits.

Peloton has a long way to go to revitalize its image and economic standing. Hopefully, with a new CEO and unique strategies, the bike company can find an untapped market and get treadmills selling again.